Title: Christensen v. Wyoming Bd. of Certified Public Accountants

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Christensen v. Wyoming Bd. of Certified Public Accountants1992 WY 129838 P.2d 723Case Number: 91-188, 92-75Decided: 10/09/1992Supreme 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)."