George B. bought 1,000 shares of stock, relying on the annual financial statement and audit report prepared by your firm. The price of the stock dropped significantly, resulting in a large financial loss to George. He is contemplating a lawsuit against your CPA firm.

George's attorney has advised him that he must prove the following:

Material misstatement in the financial statements.

The amount of his loss.

Lack of due diligence on the part of the CPA.

Privity with the CPA.

His reliance on the information contained in the financial statements.

His claim that the CPA had scienter.

Determine which of the facts must be proven under either the Security Act of 1933 or 1934, and support your determination by citing the appropriate act. For example: Section A, paragraph B states, [copy and paste the statement].

Identify under which security act these facts must be proven in order for George to prevail in a lawsuit.

Identify the AICPA Code of Conduct rules and provide an example of a rules violation.