Baldwin Corporation made a public offering of $25 million of convertible debentures and registered the offering with the SEC. The registration statement contained financial statements certified by Adams and Allen, Certified Public Accountants. The financial statements overstated Baldwin’s net income and assets by 20 percent and understated the company’s liability by 15 percent. Because Adams and Allen did not carefully follow Generally Accepted Accounting Standards, it failed to detect these inaccuracies, the discovery of which has caused the bond prices to drop from their original selling price of $1,000 per bond to $720. Can Conrad, who purchased $10,000 of the debentures, collect from Adams and Allen for his damages? Explain.
Baldwin Corporation made a public offering of $25 million of convertible debentures and registered the offering with the SEC. The registration statement contained financial statements certified by Adams and Allen, Certified Public Accountants. The financial statements overstated Baldwin’s net income and assets by 20 percent and understated the company’s liability by 15 percent. Because Adams and Allen did not carefully follow Generally Accepted Accounting Standards, it failed to detect these inaccuracies, the discovery of which has caused the
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