Series 79 practice questionmediumDue Diligence Defense
Which of the following actions best demonstrates an underwriter’s reasonable investigation during due diligence?
- AInterviewing the company’s auditor and independently verifying key accounting policies✓ Correct answer
- BRelying solely on company management representations
- CUsing only legal counsel’s summary report
- DDistributing the prospectus without review
Explanation
Why A — Interviewing the company’s auditor and independently verifying key accounting policies
Interviewing auditors and independently verifying accounting is a key step in reasonable investigation. Simply relying on management or counsel exposes underwriters to liability if inaccuracies are found.
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