Opinion on the financial statements of midwest corporation

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Burt, CPA, issued an unqualified opinion on the financial statements of Midwest Corp. These financial statements were included in Midwest's annual report, and Form 10-K was filed with the SEC. As a result of Burt's reckless disregard for GAAS, material misstatements in the financial statements were not detected. Subsequently, Davis purchased stock in Midwest in the secondary market without ever seeing Midwest's annual report or Form 10-K. Shortly thereafter, Midwest became insolvent, and the price of the stock declined drastically. Davis sued Burt for damages based on Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. Burt's best defense is that

A. Davis did not purchase the stock as part of an initial offering.

B. There has been no subsequent sale for which a loss can be computed.

C. Davis was not in privity with Burt.

D. Davis did not rely on the financial statements or Form 10-K.

Reference no: EM13130401

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