Items 1 and 2 are based on the following:
Under the liability provisions of Section 11 of the Securities Act of 1933, a CPA may be liable to any purchaser of a security for certifying materially misstated financial statements that are included in the security’s registration statement.
Under Section 11, a CPA usually will not be liable to the purchaser
- If the purchaser is contributorily negligent.
- If the CPA can prove due diligence.
- Unless the purchaser can prove privity with the CPA.
- Unless the purchaser can prove scienter on the part of the CPA.
Under Section 11, which of the following must be proven by a purchaser of the security?
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|
Reliance on the financial statements |
Fraud by the CPA |
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a. |
Yes |
Yes |
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b. |
Yes |
No |
|
c. |
No |
Yes |
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d. |
No |
No |