BILL ANALYSIS


                                                     C.S.S.B. 309
                                                       By: Harris
                                             Economic Development
                                                         04-06-95
                                   Committee Report (Substituted)
BACKGROUND

Certified public accountants (CPAs) licensed by the State of Texas
perform tax, attest, consulting, and other public accountancy
services for clients and issue reports on such services.  Under
current Texas law, a client is entitled to seek recovery from a CPA
for economic loss due to reliance on the CPA's services and
reports.  This allows third parties to seek damages against a CPA
for services rendered even though there is no contractual
relationship.  Therefore, a CPA becomes potentially liable to any
person who receives the work.  Other states have passed laws
limiting those eligible to seek damages against a CPA for services
to contracted clients and third parties that the CPA was aware of
at the time the service was performed.

PURPOSE

As proposed, C.S.S.B. 309 provides public accountants with limited
liability for their services.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Title 4, Civil Practice and Remedies Code, by
adding Chapter 91, as follows:

                 CHAPTER 91.  PUBLIC ACCOUNTANTS

     Sec.  91.001.  DEFINITIONS.  Defines "accountant," "claimant,"
     and "client."
     
     Sec.  91.002.  LIABILITY LIMITED.  Provides that an accountant
     is not liable to the claimant for negligence with respect to
     an act or omission in connection with the provision of public
     accountancy services to the claimant, except as provided in
     Section 91.003.
     
          Sec.  91.003.  EXCEPTIONS.  (1)  Provides that Section  91.002
     does not apply where the claimant is the client.
     (2) Provides that Section 91.002 does not apply where the
       accountant was aware at the time the services of the
       accountant were engaged, or agreed with the client after the
       time of the engagement, that information would be available
       to the claimant for use in connection with a specified
       transaction and the claimant was specifically identified
       with the account; the accountant communicated directly with
       the claimant concerning financial information; and the
       accountant was aware that the claimant intended to rely on
       the financial information in connection with the specified
       transaction and communicated the awareness.
       
       (3) Provides that Section 91.002 does not apply to acts or
       omissions by an accountant involving fraud.
       
     SECTION 2.     Effective date: September 1, 1995.
           Makes application of this Act prospective.

SECTION 3. Emergency clause.