Sawyer and Sawyer CPAs audited the financial statements of Rattler
Sawyer and Sawyer, CPAs, audited the financial statements of Rattler Corporation that were included in Rattler’s Form 10-K, which was filed with the SEC. Subsequently, Rattler Corporation went bankrupt and the stockholders of the corporation brought a class-action lawsuit against management, Sawyer and Sawyer, and the corporation’s board of directors and attorneys for misstatements of the financial statements.
Assume that the jury in the case decides that responsibility for $5 million in losses should be allocated as follows:
Management ......... 70%
Board of directors ......... 20
Auditors ............ 5
Attorneys ........... 5

a. Under what securities act would the stockholders initiate this lawsuit?
b. Assuming that all the defendants in the case are financially able to pay their share of the losses, calculate the amount of losses that would be allocated to Sawyer and Sawyer.
c. Assuming that the attorneys had no financial resources, describe how Sawyer and Sawyer’s share of the losses might be increased.

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