Final answer:
During the risk response phase, analytical procedures are required as a substantive test to gather audit evidence. These procedures are a critical part of the audit process and are used at various stages to assess risks and validate financial statement assertions, with the correct answer being option C.
Step-by-step explanation:
The student's question appears during a discussion on the auditing process, particularly during the risk response phase. This phase is essential, as it determines how an auditor will approach the audit after assessing the risks. Now, to answer the question: During the risk response phase, C. Analytical procedures can be used, and are required, as a substantive test to gather audit evidence. This is because analytical procedures are an essential part of the auditor's toolkit to understand and assess the client's business and identify areas of potential risk. They form a part of substantive testing, which is aimed at gathering detailed evidence to confirm the data contained in the financial statements. They help the auditor make informed decisions about the nature, timing, and extent of other audit procedures.
However, it's also important to mention that analytical procedures are not confined to the risk response phase but are employed at various points throughout an audit. Initially, they are used during the planning stage to help identify the risk of material misstatement. Secondly, as part of substantive procedures to obtain audit evidence regarding the financial statement assertions. Finally, they are employed near the end of the audit process during the overall review of the financial statements. By choosing option C, we emphasize the necessity of analytical procedures in responding to assessed risks and gathering substantive audit evidence.