Major, Major, and Sharpe, CPA's, Are the Auditors of MacLain

question 39

Multiple Choice

Major, Major, and Sharpe, CPA's, are the auditors of MacLain industries. In connection with the public offering of $10 million of MacLain securities, Major expressed an unqualified opinion as to the financial statements. Subsequent to the offering, certain misstatements and omissions are revealed. Major has been sued by the purchasers of the stock offered pursuant to the registration statement, which include the financial statements audited by Major. In the ensuing lawsuit by the MacLain investors, Major will be able to avoid liability if

• A) The errors and omissions were caused primarily by MacLain
• B) It can be shown that at least some of the investors did not actually read the audited financial statements
• C) It can prove due diligence in the audit of the financial statements of MacLain
• D) MacLain had expressly assumed any liability in connection with the public offering