A CPA firm has audited the financial statements included in a Form S-1 filed with the SEC under the Securities Act of 1933. Shortly thereafter, the company went bankrupt and the initial investors filed a class action lawsuit against the CPA firm.
(a) What should the plaintiff investors attempt to prove?
(b) What must the CPA firm prove in order to be successful with respect to the firm
Solution
Hi,
Please find the detailed answer as follows:
Part A:
The focus should be on proving the following:
a) That they have sustained losses
b) That the financial statements contain misleading information.
Part B:
CPA firm must prove the following points:
a) That the plantiff\'s losses didn\'t result from misstated financial statements.
b) Due diligence. It means that investors has reasonable grounds to believe that the financial statements were not misleading as on the effectived date. Further, they made investments based on such belief.
c) Plantiff\'s were aware of the misstatement in the financial statement at the time of purchase of securities.
Thanks.
.
Enzyme, Pharmaceutical Aids, Miscellaneous Last Part of Chapter no 5th.pdf
A CPA firm has audited the financial statements included in a Form S-1.docx
1. A CPA firm has audited the financial statements included in a Form S-1 filed with the SEC
under the Securities Act of 1933. Shortly thereafter, the company went bankrupt and the
initial investors filed a class action lawsuit against the CPA firm.
(a) What should the plaintiff investors attempt to prove?
(b) What must the CPA firm prove in order to be successful with respect to the firm
Solution
Hi,
Please find the detailed answer as follows:
Part A:
The focus should be on proving the following:
a) That they have sustained losses
b) That the financial statements contain misleading information.
Part B:
CPA firm must prove the following points:
a) That the plantiff's losses didn't result from misstated financial statements.
b) Due diligence. It means that investors has reasonable grounds to believe that the financial
statements were not misleading as on the effectived date. Further, they made investments based
on such belief.
c) Plantiff's were aware of the misstatement in the financial statement at the time of purchase of
securities.
Thanks.
