Jay Co., CPAs, audited the financial statements of Maco Corp. Jay intentionally expressed an unmodified opinion on the financial statements even though material misstatements were discovered. The financial statements and Jay's unmodified opinion were included in a registration statement and prospectus for an original public offering of Maco stock. Which of the following statements is true regarding Jay's liability to a purchaser of the offering under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934?
A. Jay will be liable if the purchaser relied on Jay's unmodified opinion on the financial statements.
B. Jay will be liable if Jay was negligent in conducting the audit.
C. Jay will not be liable if the purchaser's loss was under $500.
D. Jay will not be liable if the misstatement resulted from an omission of a material fact by Jay.
Answer: A. Jay will be liable if the purchaser relied on Jay's unmodified opinion on the financial statements.
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