Question

Jones, CPA, is in court defending himself against a lawsuit filed under the 1933 Securities Act. The charges have been filed by purchasers of securities covered under that act. If the purchasers prove their required elements, in general, Jones will have to prove that:

1) He is not guilty of gross negligence.
2) He performed the audit with good faith.
3) He performed the audit with due diligence.
4) The plaintiffs did not show him to be negligent.

Answer 1

Jones, CPA, must prove that he performed the audit with due diligence and was not grossly negligent if charged under the 1933 Securities Act. Jones must show that he adhered to professional standards and that any alleged negligence did not cause the plaintiffs' losses. This includes demonstrating thorough and competent work and a good faith effort in auditing.

Step-by-step explanation:

What Must Jones Prove in Defense Against a Lawsuit Under the 1933 Securities Act?

If purchasers of securities have brought charges against Jones, CPA, under the 1933 Securities Act, and they prove their required elements, Jones will generally have to prove that he performed the audit with due diligence. This means that he must show the court that his audit work met the professional standards of care and thoroughness expected of an accountant in his position. Specifically, Jones would need to demonstrate that due diligence was exercised which includes being thorough and competent in his audit work, and that there was no gross negligence on his part.

In accordance with the legal precedents, such as Strickland v. Washington on the adequacy of legal counsel's performance and the requirement of public officials to prove "actual malice" for defamation claims, the burden of proof in a civil lawsuit can shift. In Jones' case, after the plaintiffs prove that they purchased securities and that there were misrepresentations or omissions of material facts in the audited financial statements, Jones must provide evidence that his actions did not amount to gross negligence or wrongdoing, and that any mistakes were not made with reckless disregard for the truth.

On the other hand, if the plaintiffs assert that Jones was negligent, he might need to prove that the audit was conducted with both good faith and diligence or argue that the plaintiffs' loss was not due to any alleged negligence on his part. The impartial jury will evaluate these claims considering the standards set by legal precedents. Defense attorneys also have the responsibility to provide competent representation as demonstrated by cases like Padilla v. Kentucky.