West & Co,CPAs,rendered an Unqualified Opinion on the Financial Statements of Pride

question 96

Multiple Choice

West & Co.,CPAs,rendered an unqualified opinion on the financial statements of Pride Corp.,which were included in Pride's registration statement filed with the SEC.Subsequently,Hex purchased 500 shares of Pride's preferred stock as part of a public offering subject to the Securities Act of 1933.Hex has commenced an action against West based on the Securities Act of 1933 for losses resulting from misstatements of facts in the financial statements included in the registration statement. Which of the following elements must Hex prove to hold West liable?

• A) West rendered its opinion with knowledge of material misstatements.
• B) West performed the audit negligently.
• C) Hex relied on the financial statements included in the registration statement.
• D) The misstatements were material.

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Definitions:

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage rate.

Relative Frequency

The ratio of the number of times an event occurs to the total number of trials or observations.

Subjective

Rooted in or swayed by one's own emotions, preferences, or views.

Equity Loan

A type of loan in which the borrower uses the equity of their property as collateral.