Question

Fact Pattern: West & Co., CPAs, expressed an unmodified opinion on the financial statements of Pride Corp. These were included in Pride’s registration statement filed with the SEC. Subsequently, Hex purchased 500 shares of Pride’s preferred stock, which were acquired as part of a public offering subject to the Securities Act of 1933. Hex has commenced an action against West based on the Securities Act of 1933 for losses resulting from misstatements of facts in the financial statements included in the registration statement.

Which of the following elements must Hex prove to hold West liable?
A. West performed the audit negligently.
B. West expressed its opinion with knowledge of material misstatements.
C. The misstatements were material.
D. Hex relied on the financial statements included in the registration statement.

Answer 1

Answer:d.Hex relied on the financial statements included in the registration statement

Step-by-step explanation:

Hex relied on the financial statements included in the registration statement. Hex will have to prove that he relied on the financial statements included in the registration statement to hold West liable. Hex must prove that the decision to purchase 500 shares was influenced by the unmodified Audit opinion expressed by West on the Financial statements, and suffered losses in his investment has a result of trusting West's Unmodified audit opinion on the financial statement that contained a material misstatement