Question

A CPA issued an unqualified opinion on the financial statements of a company that sold common stock in a public offering subject to the Securities Act of 1933. Based on a misstatement in the financial statements, the CPA is being sued by an investor who purchased shares of this public offering. Which of the following represents a viable defense?

a. The investor has not proved fraud or negligence by the CPA.
b. The investor did not actually rely upon the false statement.
c. The CPA detected the false statement after the audit date.
d. The false statement is immaterial in the overall context of the financial statements.

Answer 1

d. The false statement is immaterial in the overall context of the financial statements.

Step-by-step explanation:

Note, the term 'misstatement' can also be rendered 'false statement'.

Since in this scenario, we can confirm the CPA (Certified Public Accountant) issued out an opinion about the financial statements of a company.

Since the interpretation of the financial statement is subject to personal interpretation, it can, therefore, be considered immaterial in the overall context of the financial statements; removing any liability to the CPA.