Asked by Terry Valentine on May 08, 2024
Verified
Galen prepares a financial statement for Hobby Inc. before a public offering of its stock. The Securities and Exchange Commission orders a revision of the statement. During the subsequent delay of the offering, the stock price drops. Hobby files a suit against Galen for negligence. Galen's best defense is
A) even if the accountant was negligent, this was not the proximate cause of the drop in the stock price.
B) the firm suffered no injury.
C) the accountant did not breach any duty of care that it owed to the firm.
D) the accountant owed no duty of care to the firm.
Proximate Cause
A legal concept that establishes the cause of an injury as being sufficiently related to an actionable event or condition to justify liability.
Securities and Exchange Commission
A U.S. federal agency responsible for enforcing federal securities laws and regulating the securities industry and the nation's stock and options exchanges.
Financial Statement
A formal record of the financial activities and position of a business, person, or other entity, typically including balance sheets, income statements, and cash flow statements.
- Acknowledge the ramifications, both legally and ethically, of failing to adhere to contractual duties and regulatory timelines.
Verified Answer
VG
Vanessa GarciaMay 12, 2024
Final Answer :
A
Explanation :
A) Galen's best defense is that even if there was negligence, it was not the proximate cause of the stock price drop. This implies that other factors could have influenced the stock price, not necessarily the delay caused by the revision of the financial statement.
Learning Objectives
- Acknowledge the ramifications, both legally and ethically, of failing to adhere to contractual duties and regulatory timelines.