When bringing suit against auditors under section 10(b)of the Securities Exchange Act of 1934,plaintiffs must allege and prove that
A) The financial statements in the offering registration filing contained a material misstatement.
B) The auditors were aware of material misstatements in the financial statements.
C) The auditors were guilty of ordinary negligence and failed to discover material misstatements in the financial statements.
D) The plaintiffs purchased the specific securities through a public offering and thus have a right to sue.

Question

Quizplus · Accepted Answer

To bring suit against auditors under section 10(b) of the Securities Exchange Act of 1934, plaintiffs must show that the auditors were aware of the material misstatements in the financial statements. This is known as scienter, or the intent to deceive, manipulate, or defraud. Plaintiffs are not required to show that they purchased the specific securities through a public offering or that the financial statements in the offering registration filing contained a material misstatement. However, plaintiffs must show that they suffered a loss as a result of the auditors' actions.

When Bringing Suit Against Auditors Under Section 10(b)of the Securities