Multiple Choice Questions The following questions deal with liab

Question
c. Donalds & Company, CPAs, audited the financial statements included in the annual report submitted by Markum Securities, Inc. to the SEC. The audit was improper in several respects. Markum is now insolvent and unable to satisfy the claims of its customers. The customers have instituted legal action against Donalds based on Section 10b and Rule 10b-5 of the Securities Exchange Act of 1934. Which of the following is likely to be Donalds’ best defense? (1) They did not intentionally certify false financial statements. (2) Section 10b does not apply to them. (3) They were not in privity of contract with the creditors. (4) Their engagement letter specifically disclaimed any liability to any party that resulted from Markum’s fraudulent conduct. d. Which of the following statements about the Securities Act of 1933 is not true? (1) The third party user does not have the burden of proof that she/he relied on the financial statements. (2) The third party has the burden of proof that the auditor was either negligent or fraudulent in doing the audit. (3) The third party user does not have the burden of proof that the loss was caused by the misleading financial statements. (4) The auditor will not be liable if he or she can demonstrate due diligence in performing theaudit.

Question

c. Donalds & Company, CPAs, audited the financial statements included in the annual report submitted by Markum Securities, Inc. to the SEC. The audit was improper in several respects. Markum is now insolvent and unable to satisfy the claims of its customers. The customers have instituted legal action against Donalds based on Section 10b and Rule 10b-5 of the Securities Exchange Act of 1934. Which of the following is likely to be Donalds’ best defense? (1) They did not intentionally certify false financial statements. (2) Section 10b does not apply to them. (3) They were not in privity of contract with the creditors. (4) Their engagement letter specifically disclaimed any liability to any party that resulted from Markum’s fraudulent conduct. d. Which of the following statements about the Securities Act of 1933 is not true? (1) The third party user does not have the burden of proof that she/he relied on the financial statements. (2) The third party has the burden of proof that the auditor was either negligent or fraudulent in doing the audit. (3) The third party user does not have the burden of proof that the loss was caused by the misleading financial statements. (4) The auditor will not be liable if he or she can demonstrate due diligence in performing theaudit.

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