3. In Escott v. BarChris Construction Corp., the Court concluded that defendant Peat Marwick:

A. Had not established a defense of due diligence under section 11(b) of the Securities Act of 1933 because, among other things, it failed to conduct an S-1 review.

B. Had established a defense of due diligence under section 11(b) of the Securities Act of 1933 because, among other things, it conducted an S-1 review and properly reported on material changes regarding BarChris financial condition.

C. Had not established a defense of due diligence under section 11(b) of the Securities Act of 1933 because, among other things, its accountants failed to undertake all the steps its audit program required and failed to follow up on danger signals revealed in BarChris documents.

D. Had established a defense of due diligence under section 11(b) of the Securities Act of 1933 because, among other things, it demonstrated that it had properly discovered and disclosed BarChris operation of a bowling alley under the name Capitol Lanes.