How does a financial statement audit affect a bank manager's decisions in providing loans to a corporate client?
A) Information risk could be reduced, so the bank manager may 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 helps to provide assurance and reduce information risk for the bank and the loan applicant. As a result, the bank manager may offer a lower interest rate to the corporation, as the audit provides a level of confidence in the accuracy of the financial statements presented by the client.

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