While conducting an audit, Larson & Larson Chartered Professional Accountants failed to detect a material misstatement in its client's financial statements. Larson's unqualified opinion was included with the financial statements in a prospectus for a public offering of securities made by the client. Larson knew that its opinion and the financial statements would be used for this purpose. Which of the following statements is correct with regard to a suit against Larson and the client by a purchaser of the securities?
A) Larson will not be liable if they had reasonable grounds to believe the financial
statements were accurate.
B) The purchaser must prove that Larson knew of the material misstatements.
C) Larson will be liable unless the purchaser did not rely on the financial statements.
D) The purchaser must prove that Larson was negligent in conducting the audit.
A) Larson will not be liable if they had reasonable grounds to believe the financial
statements were accurate.
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