51.5 Section 10(b) The Firestone Group, Ltd. (F stone), a company engaged in real estate developme entered into a contract to sell nursing homes it owned a buyer. The buyer paid a 30,000 deposit to Firesto and promised to pay the remainder of the 28 million purchase price in the future. The profit on the sale, consummated, would have been 2 million. To raise capital, Firestone planned on issuing 7.5 million of securities to investors . Firestone hired Laventhol , Krekstein , Hlorwath & Ilorwath (Laventhol ) a national CPA firm, to audit the company for the fis cal yearWhen Laventhol proposed to record the profit from the sale of the nursing homes as unrealized gross profitFirestone threatened to withdraw its account from Laventhol . Thereafter , Laventhol decided to ognize 235,000 as profit and to record the balance of 81.795.000 as "deferred gross profit ." This was done even though , during the course of the audit , Laventhol learned that there was no corporate resolution approv ing the sale, the sale transaction was not recorded in the minutes of the corporation , and the buyer had a net worth of only 10,000 . Laventhol also failed to verify the enforceability of the contracts Gerald M. Herzfeld and other investors received oop of the audited financial statements and invested in the securities issued by Firestone . Later , when the buyer did not purchase the nursing homes , Firestone declared bankruptcy Herzfeld and the other investors.

Answer rating: 100% (QA)

Yes Laventhol is liable for violating Section 10b ... View the full answer