After Commuter Airlines was forced into bankruptcy, the company’s stockholders brought suit against Thomas & Ross, the company’s independent auditors. Three independent assumptions concerning this litigation are listed below:
a. Commuter Airlines is not under SEC jurisdiction. The plaintiff’s suit is brought under common law in a state court that adheres to the Ultramares doctrine of auditors’ liability.
b. Commuter Airlines had recently issued its publicly held securities. The stockholders’ suit is brought in federal court under the Securities Act of 1933.
c. Commuter Airlines is under SEC jurisdiction. The stockholders’ suit is brought in federal court alleging violations of Sections 18(a) and 10(b) of the Securities Exchange Act of 1934.
Under each of the independent assumptions, separately explain
(1) The allegations that must be proved in court by the plaintiffs,
(2) Any defenses for which the auditors must bear the burden of proof if they are to avoid or reduce their liability.