Final answer:
The question pertains to the auditing theory based on information asymmetry, where audited financial information is crucial for investors to assess expected returns and risks of investments.
Step-by-step explanation:
Investors demand audited financial information so they can make an assessment of expected returns and risks associated with their investment. This reflects the theory of auditing based on the concept of information asymmetry, which is a situation where there is an imbalance of information between sellers and buyers, or in this case, between firm management and investors. Audited financial statements provide a level of assurance for investors, as they use this information to predict the expected rate of return and to assess the associated risks, such as default risk and interest rate risk, of their investments.