Reference no: EM131624757
Question: Section 11 of Securities Act of 1933. Liability Exposure. Chriswell Corporation decided to raise additional long-term capital by issuing $20 million of 12 percent subordinated debentures to the public. May, Clark & Company, CPAs, the company's auditors, were engaged to examine the June 30, 2015, financial statements, which were included in the bond registration statement. May, Clark & Company completed its examination and submitted an unmodified auditors' report dated July 15, 2015. The registration statement was filed and became effective on September 1, 2015. On August 15, one of the partners of May, Clark & Company called on Chris well Corporation and had lunch with the financial vice president and the controller. He questioned both officials on the company's operations since June 30 and inquired whether there had been any material changes in the company's financial position since that date.
Both officers assured him that everything had proceeded normally and that the financial condition of the company had not changed materially. Unfortunately, the officers' representation was not true. On July 30, a substantial debtor of the company failed to pay the $400,000 due on its account receivable and indicated to Chris well that it would probably be forced into bankruptcy. This receivable was shown as a collateralized loan on the June 30 financial statements. It was secured by stock of the debtor corporation, which had a value in excess of the loan at the time the financial statements were prepared but was virtually worthless at the effective date of the registration statement. This $400,000 account receivable was material to the financial condition of Chris well Corporation, and the market price of the subordinated debentures decreased by nearly 50 percent after the foregoing facts were disclosed. The debenture holders of Chris well are seeking recovery of their loss against all parties connected with the debenture registration.
Required: Are May, Clark & Company liable to the Chris well debenture holders under section 11 of the Securities Act of 1933? Explain. ( Hint: Review the BarChris case in this chapter.)
|
What will you do to maintain your commitment
: How will you get support from others to enable you to do work during these times? What will you do to maintain your energy, passion, and commitment?
|
|
Define the entrepreneurship instructors any free food
: There are a couple of reasons why us, the students, should not owe the entrepreneurship instructors any free food
|
|
What is the lowest price that division x could accept
: Division W needs 6,000 units each period and currently pays $42 per unit to an outside firm. What is the lowest price that Division X could accept
|
|
What is the modified duration of a two year bond
: What is the modified duration of a two year bond, paying 6% (p.a.) semi-annual coupons, and a (semi-annually compounded) yield of 2%?
|
|
Review case study of the chriswell corporation
: Section 11 of Securities Act of 1933. Liability Exposure. Chriswell Corporation decided to raise additional long-term capital by issuing $20 million.
|
|
Define mcdonalds coffee case debate
: These students should clearly indicate their position on the debate by beginning each Discussion post with the heading
|
|
What is the equivalent annual cost
: The relevant tax rate is 34 percent. All cash flows occur at the end of the year. What is the equivalent annual cost (EAC) of this equipment?
|
|
How do word choice and language style reflect writers theme
: How do word choice and language style reflect the writer's theme? How did the writer re-create on paper the sights, sounds, smells, and physical sensations?
|
|
Describe confirmation bias
: Describe confirmation bias, myside bias, and belief bias. Provide an example of how people fall prey to each of these tendencies.
|