How does a financial statement audit affect a bank manager's decisions in providing loans to a corporate client?
A)Information risk is reduced and the bank manager can lower the interest rate charged.
B)The bank manager will lower the risk-free interest rate that applies to the corporation.
C)The business risk for the client will be reduced,so the borrowing costs will decline.
D)The business risk for the client will be increased,so the borrowing costs will be lowered.

Question

Quizplus · Accepted Answer

A financial statement audit provides assurance that the financial statements of a corporation are presented fairly and in accordance with the accounting standards. This reduces the uncertainty or information risk for the bank manager while making lending decisions. As a result, the bank manager can lower the interest rate charged to the corporation, as they perceive the client to be less risky.

How Does a Financial Statement Audit Affect a Bank Manager's