Final answer:
Audit independence may be impaired if an auditor has received a loan from a client, as it could influence their ability to conduct an unbiased audit. To reassure a bank about loan repayment, a borrower may provide income information, undergo a credit check, offer a cosigner, or provide collateral.
Step-by-step explanation:
A loan from a financial institution client might impair audit independence when the auditor has a direct or material indirect financial interest in the client. Audit independence is crucial for ensuring that the auditor's judgment is not compromised by personal gains. One way this independence can be compromised is if the auditor themselves has received a loan from the client, which could be seen as a conflict of interest and may affect the auditor's ability to perform an unbiased audit.
In the financial capital market, to reassure a bank about loan repayment, a borrower may provide detailed forms regarding their sources of income and go through a rigorous credit check. Additionally, offering a cosigner or collateral can serve as substantial assurance. A cosigner is someone who legally pledges to repay the loan if the original borrower fails to do so, while collateral is an asset that the bank can seize and sell in the event of non-repayment.