- 5 15 4 Criminal Deceit Objective 5 6 The Following Questions Deal With Liability Under The 1933 And 1934 Securities 1 (50.12 KiB) Viewed 30 times
- 5 15 4 Criminal Deceit Objective 5 6 The Following Questions Deal With Liability Under The 1933 And 1934 Securities 2 (50.11 KiB) Viewed 30 times
- 5 15 4 Criminal Deceit Objective 5 6 The Following Questions Deal With Liability Under The 1933 And 1934 Securities 3 (50.11 KiB) Viewed 30 times
5-15 4. criminal deceit (Objective 3-6) The following questions deal with liability under the 1933 and 1934 securities acts. Choose the best response. a. Major, Major & Sharpe, CPAs, are the auditors of MacLain Technologies. In connection with the public offering of $10 million of Maci.ain securities, Major expressed an unqualified opinion as to the financial statements. Subsequent to the offering certain misstatements were revealed. Major has been sued by the purchasers of the stock offered pursuant to the registration statement that included the financial statements audited by Major. In the ensuing lawsuit by the Madiain investors, Major will be able to avoid liability if 1. the misstatements were caused primarily by MacLain 2. it can be shown that at least some of the investors did not actually read the audited financial statements. 3. it can prove due diligence in the audit of the financial statements of MacLain. 4. MacLain had expressly assumed any liability in connection with the public offering b. Donalds & Company, CPAs, audited the financial statements included in the annual report submitted by Markum Securities, Inc., to the SEC. The audit was improper in several respects Markum is now insolvent and unable to satisfy the claims of its customers. The customers have instituted legal action against Donalds based on Section 10 and Rule 106-3 of the Securities Exchange Act of 1934. Which of the following is likely to be Donalds best defense? 1. Section 10b does not apply to them. 2. They did not intentionally certify false financial statements. 3. They were not in privity of contract with the creditors. 4. Their engagement letter specifically disclaimed any liability to any party that resulted from Marium's fraudulent conduct. c. A CPA audited the financial statements included in a registration statement for an issuance of securities to the public. If the financial statements contained an omission that caused a purchase of the securities to sustain damages, the 1. Securities and Exchange Act of 1934 applies. 2. purchaser must prove that (she was damaged by the amission, but not negligence, privity or reliance. 3. CPA will be liable only for gross negligence. 4. due diligence defense is not available to the CPA.