49 quincy bought teal corp common stock in an

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Financial Accounting: The Impact on Decision Makers
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Chapter 9 / Exercise 2
Financial Accounting: The Impact on Decision Makers
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49. Quincy bought Teal Corp. common stock in an offering registered under the Securities Act of 1933. Worth & Co., CPAs, gave an unqualified opinion on Teal's financial statements that were included in the registration statement filed with the SEC. Quincy sued Worth under the provisions of the 1933 Act that deal with omission of facts required to be in the registration statement. Quincy must prove that: A. There was fraudulent activity by Worth. B. There was a material misstatement in the financial statements. C. Quincy relied on Worth's opinion. D. Quincy was in privity with Worth.
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Financial Accounting: The Impact on Decision Makers
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Chapter 9 / Exercise 2
Financial Accounting: The Impact on Decision Makers
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50. Bran, CPA, audited Frank Corporation. The shareholders sued both Frank and Bran for securities fraud under the Federal Securities Exchange Act of 1934. The court determined that there was securities fraud and that Frank was 80% at fault and Bran was 20% at fault due to her negligence in the audit. Both Frank and Bran are solvent and the damages were determined to be $1 million. What is the maximum liability of Bran?
51. If a CPA recklessly departs from the standards of due care when conducting an audit, the CPA will be liable to third parties who are unknown to the CPA based on
52. The Public Company Accounting Oversight Board may conduct investigations and disciplinary proceedings of:
53. A plaintiff may elect to bring a lawsuit against auditors under applicable statutes--including the Securities Act of 1933 and the Securities Exchange Act of 1934--and under common law. For each circumstance, indicate the most likely source of CPA liability by placing the appropriate letter in the third column. a. The Securities Act of 1933 b. The Securities Exchange Act of 1934 c. Common Law 54. Section 11 of the Securities Act of 1933, and Section 10 of the Securities Exchange Act of 1934 make a CPA potentially liable to a purchaser of registered securities. For items a through f, place a checkmark ( ) under the column if the plaintiff must prove its existence:
55. Auditors may be held liable to both their clients and third parties under common law. a. What must a client prove to recover its losses from the auditors under common law? b. In a court that adheres to the precedent set by the Ultramares v. Touche case what must an ordinary third party prove to recover losses from the auditors under common law? 56. 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 a class action lawsuit was filed by the initial investors against the CPA firm. a. What should the plaintiff investors attempt to prove? b. Must the plaintiffs prove that they relied on the financial statements included in the Form S-1?

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