20 . Hamish invested in the securities of the ABC Corporation ( ABC ) . He lost a great deal of money on those rofitability of ecurities after ABC's President , Ney , admitted that financial statements about the profitability of ABC had been mater ially exaggerated . Andy Accountant ( AA ) had audited those statements and had issued an iss unqualified opinion that they complied with GA AS and GAAP . Hamish has sued AA using Section IOb of the Securities Act of 1934 as the legal basis of his suit . To succeed , Hamish must prove the ST DE A . AA acted with scienter B . Hamish was in privity of contract with ABC or A A C . AA acted negligently D . the material misstatement contained in the defective financial statements had the same effect as a fraud and deceit would have had