Question

An investor seeking to recover stock market losses from a CPA firm associated with an initial offering of securities based on an unmodified opinion on financial statements that accompanied a registration statement, must establish that:_________.

A) The audited financial statements contain a false statement or omission of material fact.
B) The CPA firm would have discovered the false statement or omission if it had exercised due care in its examination.
C) The CPA firm did not act in good faith.
D) The investor relied on the financial statements.

Answer 1

A) The audited financial statements contain a false statement or omission of material fact.

Step-by-step explanation:

When an investor seeking to recover stock market losses from a CPA firm associated with an initial offering of securities based on an unmodified opinion on financial statements that accompanied a registration statement, must establish that the audited financial statements contain a false statement or omission of material fact.

An unmodified opinion on financial statements can be defined as an opinion issued by an auditor stating that there are no material misstatements and this simply implies that the, the financial statement represents a true and fair perspective.

Hence, when an investor seeking to recover stock market losses from a certified public accountant (CPA) firm, he or she must establish that the audited financial statements contain a false statement or omission of material fact in accordance with the public company accounting oversight board (PCAOB).