Chapter 4, Problem 22RQSC

Able Corporation decided to make a public offering of bonds to raise needed capital. It publicly sold $2,500,000 of 8% debentures in accordance with the registration requirements of the Securities Act of 1933. The financial statements filed with the registration statement contained the unqualified opinion of Baker & Baker, CPAs. The financial statements overstated Able’s net income and net worth. Through negligence, Baker & Baker did not detect the overstatements. As a result, the bonds, which originally sold for $1,000 per bond, have dropped in value to $700. Ira is an investor who purchased $10,000 of the bonds. He promptly brought an action against Baker & Baker under the Securities Act of 1933.
Answer the following, providing reasons for your conclusions:

a. Will Ira likely prevail on his claim under the Securities Act of 1933?
b. Identify the primary issues that will determine the likelihood of Ira’s prevailing on the claim.