This request does not make sense because application users authenticate with either only application credentials or SSO LDAP credentials if you have integrated with SSO. No application user authenticates with database credentials.
Do they perhaps mean that users don't have FND Diagnostics profile enabled? However as pointed out already, that has nothing to do with database authentication. I presume this is an auditor asking you? Do they actually have EBS experience? I.e. do they actually know what they're asking?