How does the Securities Act of 1933,which imposes civil liability on auditors for misrepresentations or omissions of material facts in a registration statement,expand auditors' liability to purchasers of securities beyond that of common law?
A)Purchasers only have to prove loss caused by reliance on audited financial statements
B)Privity with purchasers is not a necessary element of proof
C)Purchasers have to prove either fraud or gross negligence as a basis for recovery
D)Auditors are held to a standard of care described as professional skepticism

Question

Quizplus · Accepted Answer

The Securities Act of 1933 expands auditors' liability to purchasers of securities beyond that of common law by removing the requirement of privity between the auditor and the purchaser. Under common law, auditors were only liable to those with whom they had a contractual relationship, typically their client. However, under the Securities Act, auditors can be held liable to any purchaser of securities who suffered a loss due to a misrepresentation or omission of material facts in the registration statement, regardless of whether the auditor had a direct relationship with the purchaser. Thus, option B is correct. Options A, C, and D are incorrect statements.

How Does the Securities Act of 1933,which Imposes Civil Liability