Question

Ocean and Associates, CPAs, audited the financial statements of Drain Corporation. As a result of Ocean's negligence in conducting the audit, a material misstatement in the financial statements went undetected. Ocean was unaware of this fact. The financial statements and Ocean's unqualified opinion were included in a registration statement and prospectus for an initial public offering of stock by Drain. Sharp purchased shares in the offering. Sharp received a copy of the prospectus prior to the purchase but did not read it. The shares declined in value as a result of the misstatements in Drain's financial statements becoming known. Under which of the following acts is Sharp most likely to prevail in a lawsuit against Ocean?1. The Securities Exchange Act of 1934, the Securities Act of 1933, and the Sarbanes-Oxley Act of 2002 provide equal likelihoods of prevailing.2. The Securities Exchange Act of 1934.3. The Securities Act of 1933.4. The Sarbanes-Oxley Act of 2002.

Answer 1

Answer:

1. The Securities Exchange Act of 1934, the Securities Act of 1933, and the Sarbanes-Oxley Act of 2002 provide equal likelihoods of prevailing.

Explanation:

The Securities Act of 1933, also known as the 1933 Act, the Securities Act, the Truth in Securities Act, the Federal Securities Act, and the '33 Act, was approved by the United States Congress on May 27, 1933, during the Great Depression and after the stock market crash of 1929.

The Securities Act of 1933 was designed to establish transparency in the financial statements of corporations.The Securities Act also established laws against misrepresentation and fraudulent activities in the securities markets.