Randi, an Accountant, Includes a False Statement in a Report

question 11

Multiple Choice

Randi, an accountant, includes a false statement in a report for Social Media Marketing, Inc., that is filed with the Securities and Exchange Commission. When Theo buys stock in Social Media and loses money on the investment, he files a suit against Randi, alleging fraud under the 1934 Securities Exchange Act. To avoid liability, Randi can show that she​

• A) ​intended to defraud Social Media, not Theo.
• B) ​intended to profit on stock trades generally, not only Theo's.
• C) ​is an otherwise competent accountant.
• D) ​had no knowledge that her statement was false.

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Definitions:

Variable Interest Entity

A legal entity in which an investor holds a controlling interest that is not based on the majority of voting rights but on contractual or other financial arrangements.

Consolidated Statement of Cash Flows

A financial statement that provides aggregate data regarding all cash inflows and outflows from both operating and investing activities of the parent company and its subsidiaries.

Investment Account

An account held by an individual or entity with a financial institution, primarily used for holding and trading securities, stocks, bonds, and other investments.

Percent Ownership

The proportion of a company's shares owned by an individual or entity, often expressed as a percentage of the total shares outstanding.