Asking for everything might sound more legitimate than asking for one small thing. Perps generally go with their gut. In this case, this "auditor" shot for the moon with the wrong mark.
In fact, this seems like a more effective way to sniff out plaintext password storage than saying "show me everywhere you touch passwords and how they're encrypted".
One of the more interesting government audits I have heard about was the auditor did a basic internal audit and said he was part of physical secuity ect so people knew he was part of the audit team. He then showed up late, turning off the power supply to the building and then pointing at people who show up at the generator and saying "bang your dead" this is part of an audit etc. If they failed to call security before everyone was "dead" they where considered to have failed that part of the audit. He also attempted to get into the building without showing up on camera's ect. All of which sounds like a fun job and a good idea.