Auditor's Standard of Liability

The $1933$ and $1934$ acts are different in the way they protect investors and the burden of proof required. The $1933$ Act

pertains to those acquiring an initial distribution of a security; the $1934$ Act is for anyone buying or selling the security.

Auditors have different liability$/$responsibility under the different acts. For example, under the $1933$ Act, the third party

does not need to prove reliance on the financial statements; under the $1934$ Act, the third party must prove reliance. There

is also a difference relating to which third parties the auditor is liable to$.$

Roll your cursor over each basic standard of liability and, based on the hint given, choose the correct act.

Auditors must prove

good faith.

Third party must prove

existence of scienter.

Auditors must prove

due diligence

Auditors must prove

due diligence.

$1933$ Act

Auditors must prove

due diligence

Auditors must prove

good faith.

$1934$ Act

Auditors must prove

due diligence.

Third party must prove

existence of scienter.