1. Jenny, a CPA, is sued under Section 11 of the Securities Act of 1933 for her allegedly negligent preparation of the financial statements used in connection with an initial public offering of securities. Jenny might successfully defend against the charges if she can demonstrate that she spent a great deal of time investigating the company's results of operations and financial condition in connection with the preparation of the financial statements.

Group of answer choices True False

2. Ira provided accounting services to shopfree.com, a hugely successful social media website. In preparing shopfree.com's books, Ira negligently characterized a particular loss as an expense that could be taken over several quarters, rather than as a one-time expense that had to be recognized all at once. Without the error being discovered, the company filed a registration statement for an IPO with the Securities and Exchange Commission. The SEC caught Ira's error and required that shopfree.com delay its IPO by two weeks. For unrelated reasons, shopfree.com's stock price declined by 30% during those two weeks. Ira would be liable to shopfree.com for his negligence in the amount of the decline in stock sale proceeds in the IPO.

Group of answer choices True False