Under the Liability Provisions of Section 11 of the Securities

question 119

Multiple Choice

Under the liability provisions of section 11 of the Securities Act of 1933,auditors may be liable to any purchaser of securities for certifying materially misstated financial statements that are included in the registration statement.Under section 11,which of the following must a purchaser of the security prove?

• A) Reliance on financial statements, yes; fraud by auditors, yes.
• B) Reliance on financial statements, yes; fraud by auditors, no.
• C) Reliance on financial statements, no; fraud by auditors, yes.
• D) Reliance on financial statements, no; fraud by auditors, no.

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Definitions:

General Partnership

A business structure where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed. This arrangement involves sharing the profits, liabilities, and decision-making processes of the business.

Individually Liable

The legal responsibility of a single person to pay off debts or fulfill obligations incurred.

Creditors

Creditors are individuals or entities that lend money or extend credit, and are owed repayment by debtors.

Capital Balance

The amount of money that a company has in its capital account, reflecting the total capital invested by shareholders and retained earnings.