SRC-JFA C.S.S.B. 275 75(R)BILL ANALYSIS


Senate Research CenterC.S.S.B. 275
By: Sibley
Economic Development
2-27-97
Committee Report (Substituted)


DIGEST 

Currently, under Texas law, a client of a Certified Public Accountant
(CPA) is entitled to seek recovery from the accountant for economic loss
due to reliance on the CPA's services and reports. Additionally, third
parties who are not clients of the CPA can seek recovery if the accountant
knew or should have known the third party might rely on the CPA's
services.   The consequence of this additional liability is that a third
party can seek damages against a CPA for services rendered even though no
contractual relationship exists between the third party and the CPA.  This
bill would limit the liability of CPAs for negligence to a claimant for an
act or omission in connection with the provision of accounting services.   

PURPOSE

As proposed, C.S.S.B. 275 limits the liability of accountants for
negligence to a claimant for an act or omission in connection with the
provision of accounting services.     

RULEMAKING AUTHORITY

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.  LIABILITY OF PUBLIC ACCOUNTANTS

Sec. 91.001.  DEFINITIONS.  Defines "accountant," "accounting services,"
"claimant," "client," and "specified transaction."  

Sec. 91.002.  LIABILITY LIMITED.  Provides that an accountant is not
liable for negligence to a claimant for an act or omission in connection
with the provision of accounting services.  
Sec. 91.003.  EXCEPTIONS.  Provides that Section 91.002 does not apply if
the claimant is the client; the accountant was aware at the time the
services of the accountant were engaged, or agreed after the time of the
engagement, that the financial statement or other information would be
made available to the claimant or a similarly situated claimant, and the
accountant had actual knowledge that the claimant, or a similarly situated
claimant, would use the financial statement or information in connection
with a specified transaction; or the act or omission of the accountant
involves fraud or gross negligence.   

Sec. 91.004.  WAIVER.  Authorizes an accountant to waive the provisions of
this chapter in writing.   

SECTION 2. Effective date: September 1, 1997.
  Makes application of this Act prospective.

SECTION 3. Emergency clause.


 
SUMMARY OF COMMITTEE CHANGES

Amends SECTION 1, Section 91.001, Civil Practice and Remedies Code, to
include within the definition of "accountant" a firm holding a certificate
or registration issued by the Texas State Board of Public Accountancy.
Provides that a "claimant" and a "client" both additionally mean a certain
individual or entity.  Defines "accounting services" and "specified
transaction."   

Amends SECTION 1, Section 91.002, Civil Practice and Remedies Code, to
revise proposed limited liability for an accountant in regard to
accounting services.   

Amends SECTION 1, Section 91.003, Civil Practice and Remedies Code, to
revise proposed exception to limited liability for accountant in regard to
a certain claimant or a certain similarly situated claimant who is not a
client of the accountant.