Auditing and Assurance Services 9th Edition by Alvin Arens,Mark Beasley,Randy Elder

Exercise 8

Question is based on the following information: Dart Corporation engaged Jay Associates, CPAs, to assist in a public stock offering. Jay audited Dart's financial statements and gave an unqualified opinion, despite knowing that the financial statements contained misstatements. Jay's opinion was included in Dart's registration statement. Hansen purchased shares in the offering and suffered a loss when the stock declined in value after the misstatements became known.
In a suit against Jay and Dart under the Section 11 liability provisions of the Securities Act of 1933, Hansen must prove that
A) Jay knew of the misstatements.
B) Jay was negligent.
C) The misstatements contained in Dart's financial statements were material.
D) The unqualified opinion contained in the registration statement was relied on by Hansen.