Answered: What are the major differences in…

What are the major differences in auditors’ liability under the Securities Act of 1933 and the Securities Exchange Act of 1934?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter8: Securities Law Considerations When Obtaining Venture Financing

Section: Chapter Questions

Problem 12DQ

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Contrast the auditor’s liability under the Securities Act of 1933 withthat under the Securities Exchange Act of 1934.
Please answer the question: After the Securities Act of 1933 and Securities Exchange act of 1934, what did auditors focus on? Why was the change in focus necessary?
The Securities Act of 1933 and Securities Exchange Act of 1934 containa. Civil liability provisions applicable to auditors. b. Criminal liability provisions applicable to auditors. c. Neither a nor b. d. Both a and b.
The burden of proof that must be proven to recover losses from the auditors under the Securities Exchange Act of 1934 is generally considered to be: :
Which of the following is a major difference in auditors’ liability under the Securities Act of1933 and the Securities Exchange Act of 1934?a. The burden of proving reliance on misstated financial statements and the relationshipbetween these financial statements and the economic loss.b. The auditors’ required degree of professional care.c. Both of the above.d. Neither of the above
What was the primary reason for the establishment of the 1933 Securities Act and the 1934 Securities Exchange Act? What power does the Securities and Exchange Commission (SEC) have?
Under federal securities laws, the SEC has the authority to set accounting standards in the United States. True /False ?
Which of the following statements regarding auditors’ liability under the Securities Act of1933 is not true?a. The act relates to the initial issuance of securities to the public, normally through an initial public offering.b. Auditors’ liability arises because of audited financial information filed with the SEC.c. Third parties must demonstrate that they relied on misstated financial statements thatwere examined by auditors.d. Auditors may be liable if they are found to have engaged in ordinary negligence.
Which of the following would be the auditors’ most likely defense in an action broughtunder the Securities Exchange Act of 1934?a. The investor did not have privity with auditors.b. The investor did not suffer a loss based on the materially misstated financial statements.c. The auditors acted in good faith and were not aware of the materially misstated financialstatements.d. The financial statements were not filed with the Securities and Exchange Commission
Describe the due diligence and causation defenses available to auditors under the Securities Act.
Consider section 24 of the Securities Act of 1933 and section 32 of the Securities Exchange Act of 1934 (see Module C). Based on the case information, do you believe that Madoff’s auditor, Friehling, should be facing criminal charges? Why or why not?
When investors sue auditors for damages under section 11 of the Securities Act of 1933,they must allege and provea. Scienter on the part of auditors.b. The audited financial statements contained a material misstatement.c. They relied on the materially misstated financial statements.d. Their reliance on the materially misstated financial statements was the direct cause oftheir loss.