Problem

West & Co., CPAs, rendered an unqualified opinion on the financial statements of Pride...

West & Co., CPAs, rendered an unqualified opinion on the financial statements of Pride Corp., which were included in Pride’s registration statement filed with the SEC. Subsequently, Hex purchased 500 shares of Pride’s preferred stock as part of a public offering subject to the Securities Act of 1933. Hex has commenced an action against West based on the Securities Act of 1933 for losses resulting from misstatements of facts in the financial statements included in the registration statement.

Which of the following elements must Hex prove to hold West liable?

A. West rendered its opinion with knowledge of material misstatements.

B. West performed the audit negligently.

C. Hex relied on the financial statements included in the registration statement.

D. The misstatements were material.

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