An auditor has assessed both inherent risk and control risk for trade receivables as high. What is the appropriate response?

Correct answer: A) Plan more extensive substantive procedures on receivables to reduce detection risk

Explanation

To keep audit risk at an acceptable level, a high risk of material misstatement must be offset by low detection risk. The auditor achieves this through more, and more persuasive, substantive procedures, for example larger samples or procedures closer to the year end. High control risk means controls cannot be relied upon, and raising materiality would be an inappropriate response.