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Question
Ocean and Associates, CPAs, audited the financial statements of Drain Corporation. As a result of Ocean's negligence in conducting the audit, a material misstatement in the financial statements went undetected. Ocean was unaware of this fact. The financial statements and Ocean's unqualified opinion were included in a registration statement and prospectus for an initial public offering of stock by Drain. Sharp purchased shares in the offering. Sharp received a copy of the prospectus prior to the purchase but did not read it. The shares declined in value as a result of the misstatements in Drain's financial statements becoming known. Under which of the following acts is Sharp most likely to prevail in a lawsuit against Ocean?
A. The Securities Exchange Act of 1934, the Securities Act of 1933, and the Sarbanes-Oxley Act of 2002 provide equal likelihoods of prevailing.
B. The Securities Exchange Act of 1934.
C. The Securities Act of 1933.
D. The Sarbanes-Oxley Act of 2002.
Answer
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Related questions
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Which of the following statements is not true concerning assurance services?
A. The growth in assurance services has been driven in part by users' demands for more relevant information.
B. Assurance services focus on improving the quality of information or its context, for decision makers.
C. Unlike audit and attestation engagements, an engagement to perform assurance services does not require the CPA to consider information reliability.
D. Auditing and attestation services can be viewed as subsets of assurance services since there is overlap in their objectives.
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B. the review was performed in accordance with generally accepted auditing standards.
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Which of the following procedures is not included in a review engagement of a nonpublic entity?
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B. The CPA is liable only to known users of the financial statements.
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D. The CPA probably is liable to the client even if the client was aware of the fraud and did not rely on the opinion.
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An auditor can be held criminally liable for
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Q:
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C. necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."
D. is appropriate and would not negate the unqualified opinion.
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B. capability of extending the due dates of existing debt.
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