What common benefit do audits provide to third parties like banks or tax authorities?

Audits provide independent assurance and credibility, which is crucial for third parties such as banks and tax authorities. When an audit is conducted, it provides an unbiased examination of the financial statements, ensuring that they are free from material misstatement and accurately reflect the financial position and performance of an organization. This independent verification instills a level of confidence in the reported financial information.

For banks, this assurance helps in assessing the creditworthiness of borrowers, enabling informed lending decisions based on reliable financial data. Tax authorities rely on audited financial statements to ensure compliance with tax regulations and to verify the accuracy of reported income and expenses. This credibility is essential for making decisions that may carry financial implications for both parties involved.

Other options do not directly reflect the primary benefit that audits offer to third parties. Higher tax deductions and guaranteed loan approvals are not outcomes that arise solely from an audit and may depend on various other factors outside the scope of audit assurance. Financial advice on investments is also not a service typically provided by audits, as audits focus on verifying financial information rather than advising on investment strategies.