Christensen v. Wyoming Bd. of Certified Public Accountants
Annotate this Case
Christensen v. Wyoming Bd. of Certified Public Accountants
1992 WY 129
838 P.2d 723
Case Number: 91-188, 92-75
Decided: 10/09/1992
Supreme Court of Wyoming
Curtis W. CHRISTENSEN, Appellant (Plaintiff),
v.
WYOMING BOARD OF
CERTIFIED PUBLIC ACCOUNTANTS, Appellee (Defendant).
Curtis W.
CHRISTENSEN, Appellant (Petitioner),
v.
WYOMING BOARD OF
CERTIFIED PUBLIC ACCOUNTANTS, Appellee (Respondent).
Appeal from District Court, SheridanCounty, James N. Wolfe,
J.
Michael K. Shoumaker, Shoumaker and
Dollison, and Tom C. Toner, Yonkee and Toner, Sheridan, for appellant.
Steven F. Freudenthal, Herschler,
Freudenthal, Salzburg, Bonds & Rideout, P.C.,
Cheyenne, for appellee.
Before MACY, C.J., and THOMAS, CARDINE, URBIGKIT
and GOLDEN, JJ.
URBIGKIT,
Justice.
[¶1.] Appellant, a certified
public accountant, appeals from a disciplinary board reprimand which followed a
review of his preparation of an audited statement for a small public water and
sewer district. The subject of the reprimand was contended mistakes in audit
preparation and report text. Following an appeal to the district court, which
affirmed the action of the disciplinary board, we again
affirm.
I.
ISSUES
[¶2.] Appellant, Curtis W.
Christensen (Christensen), states a threefold basis for reversal of the
disciplinary board reprimand which he received:
A. The action of the Wyoming Board
of Certified Public Accountants was arbitrary and
capricious.
B. The actions of the Wyoming Board
of Certified Public Accountants violated the constitution and exceeded statutory
authority.
C. The conclusion[s] of the Wyoming
Board of Certified Public Accountants are unsupported by substantial
evidence.
[¶3.] Appellee, the Wyoming
Board of Certified Public Accountants (State Board), significantly restates one
issue:
Appellee agrees with
Appellant's statement of Issue A - arbitrary and capricious - and Issue C -
substantial evidence, but suggests that Issue B should read as
follows:
B. Whether a licensed
certified public accountant
1. who voluntarily,
and for compensation, certifies that a financial statement complies with
generally accepted accounting principles and was prepared in accordance with
generally accepted auditing standards; and
2. further testifies
that he knew such standards and principles to be applicable at the time he
prepared the financial statement, may later renounce any professional
responsibility to comply with those standards and
principles?
II.
FACTS
[¶4.] Christensen has held a
Wyoming
license as a certified public accountant since 1973. The State Board is a
statutorily created licensing and disciplinary agency for this profession.
Christensen, as a part of his general accounting practice within the Sheridan, Wyoming area, undertook an audit for a small
suburban water and sewer district, Means First Extension Water and Sewer
District (Means District), for the calendar year ending June 30, 1988.
[¶5.] A contested
disciplinary hearing was instituted by the State Board with a complaint and
notice dated August 15, 1989. The complaint alleged mistakes in the Means
District audit for cause. The proceeding was interrupted by a lawsuit instituted
by Christensen to enjoin the State Board from conducting the hearing. A
preliminary injunction was granted by the district court. Appeal was then taken
to this court. By a November 15, 1990 decision, we affirmed the district court
as to Count I of the disciplinary proceeding and reversed for Count II.
Wyoming Bd. of Certified Public Accountants v.
Christensen, 800 P.2d 853 (Wyo. 1990) (Christensen
I).
[¶6.] The decision in
Christensen I found that the first count had been resolved by the parties'
agreement and the injunction against proceeding granted by the district court
was proper. This case then came before the State Board on the second count in a
contested disciplinary hearing which was conducted by a hearing officer. Her
report was reviewed and amended by the State Board to be finalized into a
quality of work reprimand. The reprimand was entered pursuant to Wyo. Stat. §
33-3-121(a)(iv) (1987) for violation of two rules by Christensen in his
preparation of the Means District audited financial statements for the year
ending June 30, 1988. Administrative agency review was again requested through
the district court which affirmed the State Board. Appeal to this court now
follows from the district court's decision.
[¶7.] The substance of the
State Board's complaint against Christensen in Count II is generally that he
violated Sections 3(b) and 3(c), Chapter VI of the Board's Rules and Regulations
by:
(a) failing to comply with
applicable generally accepted auditing standards ("GAAS");
and
(b) opining that the financial
statements were presented in conformity with generally accepted accounting
principles ("GAAP") when the financial statements in fact contained departures
from GAAP which had a material effect on the financial statements taken as a
whole.[1]
An amended complaint alleged that
the departure from GAAS and GAAP resulted in a departure from acceptable
performance significant enough to make the audit report and the amended audit
report materially incorrect and misleading.
[¶8.] The cited rules and
regulations of the State Board provided:
(b) Rule 202 -
Auditing Standards. A licensee shall not permit his name to be associated with
financial statements in such a manner as to imply that he is acting as an
independent certified public accountant with respect to such financial
statements unless he has complied with applicable generally accepted auditing
standards. Statements on Auditing Standards issued by the American Institute of
Certified Public Accountants, and other pronouncements having similar generally
recognized authority, are considered to be interpretations of generally accepted
auditing standards, and departures therefrom must be justified by those who do
not follow them.
(c) Rule 203 -
Accounting Principles. A licensee shall not express an opinion that financial
statements are presented in conformity with generally accepted accounting
principles if such financial statements contain any departure from such
accounting principles which has a material effect on the financial statements
taken as a whole, unless the licensee can demonstrate that by reason of unusual
circumstances the financial statements would otherwise have been misleading. In
such a case, the licensee's report must describe the departure, the approximate
effects thereof, if practicable, and the reason why compliance with the
principle would result in a misleading statement. For purposes of this rule,
generally accepted accounting principles are considered to be defined by
pronouncements issued by the Financial Accounting Standards Board and its
predecessor entities and similar pronouncements issued by other entities having
similar generally recognized authority.
Amended Rules and Regulations of
the Board of Certified Public Accountants, ch. VI, § 3(b) &
(c).
[¶9.] The statutory basis for
the State Board to adopt rules and regulations is provided in Wyo. Stat. §
33-3-108 (1987), with subsection (a)(ii) applicable here:
(a) The board shall
prescribe rules and regulations not inconsistent with the provisions of this act
[§§ 33-3-101 through 33-3-131] as it deems consistent with, or required by, the
public welfare. The rules and regulations shall include:
* * * * *
*
(ii) Rules of professional
conduct for establishing and maintaining high standards of competence and
integrity for certified public accountants in the profession of public
accountancy[.]
[¶10.]
In its findings and conclusions, the State Board discussed eight specific
"departures," including contended misclassifications and drafting errors. The
State Board then concluded in its findings of fact:
Taken as a whole, the Board finds
there are sufficient errors in the Means Report that result in a materially
incorrect report. The multiple violations of GAAP have a material effect on the
financial statement taken as a whole.[2]
[¶11.]
The corresponding State Board conclusions of law
were:
7. Petitioner has
proven by clear and convincing evidence that Respondent violated W.S.
33-3-121(a)(iv) by his violation of Rule 202 and 203.
8. The evidence does
not support a conclusion that Respondent willfully or intentionally violated
Rule 202 and 203.
9. Because of the
revised Standards for Audit of Governmental Organizations, Programs, Activities,
and Functions published by the U.S. General Accounting Office, the Board does
not impose additional educational requirements to be fulfilled by Respondent and
finds that allowing Respondent to continue to do audits will not jeopardize the
public interest or put the public at risk.
III.
DISCUSSION
[¶12.]
In reality, this court addresses a question of the sufficiency of the
evidence in an administrative appeal with claimed error from denial of two quite
different defenses. Christensen first contends that the standards, to which he
had been subjected as requirements for a certified public audit, have not been
properly adopted as rules and regulations of the State Board under the Wyoming
Administrative Procedure Act, Wyo. Stat. § 16-3-103 (1992). Consequently, he
contends they are not enforceable for disciplinary purposes. Touche Ross &
Co. v. S.E.C., 609 F.2d 570 (2d Cir. 1979). The second argument addresses his
broad perspective of a discriminatory enforcement of rules directed against him
in the "out to get him" idiom.3
[¶13.]
In responding to Christensen's first argument, we will keep this decision
confined to the highly specialized activity of certified public auditing and
opinion writing. No accountant, even if qualified, is required to certify any
financial report; but if done, it will have a very special meaning in financing
business and governmental regulations financial report auditing. Duggins v.
North Carolina State Bd. of Certified Public Accountant Examiners, 25 N.C. App.
131, 212 S.E.2d 657 (1975), aff'd 294 N.C. 120, 240 S.E.2d 406
(1978).
[¶14.]
The standards are nationally set so that all certified reports will have
uniformity and specific nationwide reliability and validity. We find no problem
with the State Board's requirement that a licensee, who undertakes to issue a
certified audit, must be a CPA and be familiar with all current requirements for
examination of the client's financial records in obligation to address all
specified requirements in the audit report preparation. If the accountant is
unprepared to assume the responsibility, there is no career requirement existent
to perform this character of accounting services. Gaines v. Allen, 20 A.D.2d 598, 245 N.Y.S.2d 907 (1963). Determination of the responsibilities assumed is
within the agency regulatory authorization. Arnold v. Board of Accountancy, 49 Or. App.
261, 619 P.2d 912 (1980); McPherson v. Employment Division, 285 Or. 541, 591 P.2d 1381 (1979). See also R.P. Davis, Annotation, Regulation of Accountants, 70
A.L.R.2d 433, §§ 2 and 3 (1960).
[¶15.]
There is no impermissible delegation of authority by the state regulatory
agency in requiring certified public audits to conform to existent national
standards of accounting practice. The certification in the report attests to
compliance. The constitutional and statutory right of the State Board to
regulate the performance of a certified public accountant is not at issue.
Hilkert v. Canning, 58 Ariz. 290, 119 P.2d 233
(1941); cf. Wyoming State Bd. of Accountancy v. Macalister, 493 P.2d 1268
(Wyo. 1972),
where at that time, and not true now, the final decision was vested in the
office of the Governor.
[¶16.]
The second defense of discriminatory enforcement finds no greater favor
within our appellate review. Gaines, 245 N.Y.S.2d at 908. Unfortunately, the
many others or "everybody else" response to imperfect conduct cannot be a
standard for non-performance unless egregious or malicious maladministration in
regulation is demonstrated by specific proof in the record. We fail to find that
character of evidence demonstrated here and agree with the conclusion of the
district court in its first appellate review. Lehman v. State Board of Public
Accountancy, 263 U.S. 394, 44 S. Ct. 128, 68 L. Ed. 354
(1923).
[¶17.]
In reality, this appeal comes to be a sufficiency of the evidence review.
Westates Const. Co. v. Sheridan County School Dist. No. 2, Bd. of Trustees, 719 P.2d 1366 (Wyo. 1986). We are asked to determine that the
audit report imperfections were not materially misleading within the regulatory
standards for rigid and exacting professional performance. Existence of
cumulative mischaracterizations and detail imperfections in the final product is
admitted. We will not separately undertake a factual analysis following the
administrative agency determination. The authority to make discretional
decisions about standards of CPA auditing practices is invested exclusively in
the State Board. Park Place-Dodge Corp. v. Collins, 75 Misc.2d 25, 346 N.Y.S.2d 949, 952 (1973), aff'd 43 A.D.2d 910, 352 N YS.2d 415
(1974).
[¶18.]
This administrative agency decision appeal presents sufficiency of the
evidence standard of review overlaid with contentions of a regulatory agency
discriminatory decision. Those issues invoke precedent about which there is
detailed case law. This court recently and comprehensively stated those
procedural rules and determinative principles in Union Telephone Co., Inc. v.
Wyoming Public Service Com'n, 821 P.2d 550, 556-57 (Wyo. 1991) (and additionally
in Union Telephone Co., Inc. v. Wyoming Public Service Com'n, 833 P.2d 473 (Wyo.
1992)):
In reaching a determination with
respect to whether the factual decision of an administrative agency is arbitrary
and capricious, our standard is that we review the entire record and determine
whether the decision can be supported by evidence found in that record. Palmer
v. Board of Trustees of Crook County School District No. 1, 785 P.2d 1160
(Wyo. 1990). *
* *
* * * * *
*
* * * In reaching the determination
as to whether the record encompasses substantial evidence to support the agency
decision, we also review the entire record presented before the agency. Matter
of Warehime, 806 P.2d 292 (Wyo. 1991);
Tri-State Generation and Transmission Association, Inc. v. Wyoming Public Service Commission, 784 P.2d 627
(Wyo. 1989); Western Radio Communications, Inc.
v. Two-Way Radio Service, 718 P.2d 15 (Wyo. 1986). In this court, the burden of
establishing the absence of substantial evidence is assigned to the party
challenging the sufficiency of the evidence. Palmer; Western Radio. Substantial
evidence is relevant evidence, which reasonable minds would accept as adequate
to support the findings of the agency. Palmer; McCulloch Gas Transmission
Company v. Public Service Commission of Wyoming, 627 P.2d 173 (Wyo. 1981). The administrative agency is
vested with the authority to weigh and determine the credibility of evidence
based upon its expertise and experience. Palmer; Western Radio; Matter of Rule
Radiophone Service, Inc., 621 P.2d 241 (Wyo. 1980). We do not substitute our judgment
for that of the PSC if the agency decision is supported by substantial evidence.
Mountain States Telephone and Telegraph Company v. Public Service Commission of
Wyoming, 698 P.2d 627 (Wyo.
1985).
[¶19.]
In this second appellate review, we affirm the decision of the district
court. The sufficiency of the evidence to demonstrate that imperfections existed
is clearly sustained in the evidence. Resolution of the relation of performance
imperfections to disciplinary action is vested in the administrative agency
discretion and responsibility which we, in deciding this appeal, do not find to
have been abused.
IV.
CONCLUSION
[¶20.]
We affirm the district court in sustaining the disciplinary decision of
the Wyoming Board of Certified Public Accountants.
FOOTNOTES
1 Accounting
terminology and agencies included in the discussion, normally designated only by
acronyms, include: GAAS - generally accepted accounting standards and GAAP -
generally accepted accounting principles.
GAAS is a product of
the American Institute of Certified Public Accountants (AICPA), which is a
national CPA organization. The GAAP was developed by the Financial Accounting
Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).
These two organizations are funded and managed by the Financial Accounting
Foundation, "an independent, private-sector organization * * *." Promulgations
of the GASB and the FASB are considered authoritative by the AICPA and define
expected criteria for proper audit and review report preparation during any
certified public audit.
2 It appears that this was the first
public agency certified public audit undertaken by Christensen in his accounting
career. The claimed defects were clearly neither major nor exceptionally
misleading. The report had been accepted by the Wyoming State Examiner's Office
for whom, in specific regulatory application, it had been prepared. The State
Board action can be accurately described as a cumulative, imperfect,
disciplinary review charge.
3 Neither Christensen nor the State
Board provide case law citations for licensing and disciplinary activities of a
regulatory board which were specifically attacked as discriminatory. However,
this record factually demonstrates that the State Board has pursued broad
disciplinary proceedings against numerous holders of CPA licenses. The issue of
discriminatory enforcement of regulatory provisions addresses the statutory
arbitrary or capricious standard for our appellate review. Wyo. Stat. §
16-3-114(c)(ii)(A) (1990); Union Telephone, Co., Inc. v. Wyoming Public Service
Com'n, 833 P.2d 473 (Wyo. 1992).
The Wyoming statutory
standard for review of administrative agency action is found in Wyo. Stat. §
16-3-114(c)(ii):
(ii) Hold unlawful
and set aside agency action, findings and conclusion found to
be:
(A) Arbitrary,
capricious, an abuse of discretion or otherwise not in accordance with
law;
(B) Contrary to
constitutional right, power, privilege or immunity;
(C) In excess of
statutory jurisdiction, authority or limitations or lacking statutory
right;
(D) Without
observance of procedure required by law; or
(E) Unsupported by
substantial evidence in a case reviewed on the record of an agency hearing
provided by statute.
See also W.R.A.P.
12.09, which provides in part: "The court's review shall be limited to a
determination of the matters specified in §
16-3-114(c)."
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