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 have to prove only 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

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The Securities Act of 1933 expanded auditors' liability to purchasers of securities beyond that of common law by removing the privity requirement, which means that purchasers do not have to prove a direct contractual relationship between themselves and the auditors to hold the auditors liable for misrepresentations or omissions of material facts in a registration statement. This expands auditors' liability to a larger pool of potential plaintiffs who may have relied on the audited financial statements when making investment decisions. In addition, the Securities Act imposes strict liability on auditors, which means that purchasers do not have to prove fraud or negligence as a basis for recovery, but only have to prove that they suffered a loss caused by the reliance on audited financial statements. Finally, the Securities Act also imposes a higher standard of care on auditors, described as "reasonable investigation," which requires auditors to exercise professional skepticism and diligence in the performance of their audit work.

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