ALJDEC decisions subject to certification as final

09F-2009.058-ACY · State Board of Accountancy · 2009-08-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING DATES: May 12, 2009 at 9:00 a.m. and July 24, 2009 at 9:00 a.m. APPEARANCES: Applicant Gina Foroughi did not appear for the May 12, 2009 hearing but was provided a transcript of the evidence taken; Ms. Foroughi appeared on her own behalf at the July 24, 2009 hearing; the Arizona Board of Accountancy appeared at both hearings through its attorney, Daniel R. Christl, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure Under A.R.S. § 32-702(A) the Arizona State Board of Accountancy (“the Board”) administers and enforces statutes relating to Certified Public Accountants (“CPAs”) and under A.R.S. § 32-703(B)(6) has been authorized to “[i]ssue to qualified applicants certificates . . . .” On February 28, 2008 and on March 17, 2008, Applicant Gina Foroughi submitted Applications for Arizona CPA Certificate to the Board. On April 4, 2008, the Board informed Ms. Foroughi that her applications were incomplete and instructed her on how to provide the missing information to complete the applications. On May 18, 2008, Ms. Foroughi submitted another Application for Arizona CPA Certificate to the Board. On February 9, 2009, the Board issued an order denying Ms. Foroughi’s application, explaining that the Board’s Certification Advisory Committee had voted to recommend denial for the following reasons: 7. Applicant’s college and university transcripts only documented 27 semester hours of upper level accounting courses. Applicant was short 3 semester hours of upper level accounting courses.

8. As part of the application packet, Applicant was requested to submit certificates of experience (“COE”) to demonstrate compliance with A.R.S. § 32-721. Applicant supplied evidence [of] 760 hours of examining experience, but failed to provide evidence of any reporting experience and failed to provide evidence of at least one year experience in the office of a certified public accountant or public accountant, in private industry or with a government agency that has exposed the applicant to and provided the applicant with experience in the practice of accounting under A.R.S. §§ 32-721, 32-701(11) and A.A.C. R4-1-343.

Ms. Foroughi timely appealed the Board’s denial. The Board obtained additional evidence on classes that Ms. Foroughi had taken, which is discussed below. Pursuant to A.R.S. §§ 41-1092(7)(a) and 41-1092.01(E), the Board referred Ms. Foroughi’s appeal to the Office of Administrative Hearings, an independent state agency, to schedule a fair hearing. After several continuances, a hearing was held on May 12, 2009 and July 24, 2009. The Board presented the testimony of Barbara J. Muller, CPA, the Chairperson of the Board’s Certification Advisory Committee and a Senior Lecturer of Accountancy at Arizona State University, and Vicki L. Rios, CPA, a member of the Certification Advisory Committee, Revenue Manager for the City of Peoria and a Faculty Associate at the W.P. Carey School of Business at Arizona State University. The Board also submitted 25 exhibits. Ms. Foroughi testified on her own behalf and submitted 13 exhibits. Applicable Statutes and Regulation A.R.S. § 32-721(B) requires that, to be certified as a CPA, an applicant must meet the following requirements, in addition to passing the CPA examination: 1. Have been employed full time . . . for at least one year in the office of a certified public accountant or public accountant, in private industry or with a government agency that has exposed the applicant to and provided the applicant with experience in the practice of accounting. The board may accept part-time employment as a substitute for the requirement of one year of full-time employment if the part-time employment provides the applicant with equivalent experience in the practice of accounting.

2. Present satisfactory evidence from an accredited institution or college or university maintaining standards comparable to those of an accredited institution that the applicant has completed at least one hundred fifty semester hours of education of which:

(a) At least thirty-six semester hours are accounting courses of which at least thirty semester hours are upper level courses.

(b) At least thirty semester hours are related courses.

[Emphases added.] A.R.S. § 32-701 provides the following definitions: 11. “Practice of accounting” means providing any accounting services, including recording and summarizing financial transactions, analyzing and verifying financial information, examining, reviewing and reporting on financial statements, reporting financial results to an employer, clients or other parties and rendering attestation, tax and management advisory services to an employer, clients or other parties. . . . .

15. “Related courses” means: . . . .

(e) Finance.

[Emphases added.] Under the authority of A.R.S. § 32-703(B)(13), the Board has promulgated A.A.C. R4-1-343 relating to “Education and Accounting Experience,” which provides in relevant part: A. Definitions. For the purpose of demonstrating the education and experience requirements of A.R.S. § 32-721, the following definitions apply:

1. “Employed” means engaged in providing accounting services to an employer, clients or other third parties.

2. “Full time” means employed and providing accounting services at least 30 hours per week.

3. “Examining” means the critical inquiry and analysis of financial or accounting information, which may include balance sheets, income statements, cash flow statements, and tax returns.

4. “Reporting” means to express an opinion on the results of an examination of financial statements by oral or written communication to an employer, clients, or other third parties.

5. “Upper level course” means course taken beyond the basic level, after any required prerequisite or introductory accounting course and does not include principles of accounting or similar accounting courses.

B. Certificate of Experience. To demonstrate compliance with the experience requirements of A.R.S. § 32-721, an applicant for certification shall submit:

1. One or more certificates of experience, completed by an individual who possesses personal knowledge of the applicant’s work and is able to confirm the applicant’s accounting experience, and

a. Is a certified public accountant; or

b. Has accounting education and experience similar to that of a certified public accountant; and

2. Other information required by the Board for explanation or clarification of experience.

[Emphases added.] The Education Requirement As noted above, the Board had accepted its Certification Advisory Committee’s recommendation that Ms. Foroughi had submitted evidence of having only completed 27 hours of upper level courses, three hours short of the 30 hours required by A.R.S. § 32-721(B)(2)(a). Ms. Foroughi argued that the following two of the courses included on her transcript were upper level courses and should have counted toward the 30 hours: (1) ACC115 entitled “Computerized Accounting” taken at Glendale Community College; and (2) WB5120 entitled “Financial Statement Analysis” taken at Thunderbird, The American Graduate School of International Management. Ms. Muller and Ms. Rios testified that the Certification Advisory Committee looks at university’s designation, the prerequisites, the course description in the course catalog, and any other available information and documentation to determine whether or not a course is an upper level accounting course. Glendale Community College ACC115, “Computerized Accounting” ACC115 was a two-credit course. Ms. Muller testified that courses numbered in the 100 sequence are generally lower level courses. The Board submitted the Competencies for ACC115 from Glendale Community College, as follows: 1. Demonstrate on a microcomputer booting of the operating system, formatting, copy commands, backup, loading the accounting software system, and printing. . . .

2. Develop a chart of accounts using an acceptable account numbering system, set up individual accounts for customers and creditors, and establish individual payroll records for employees on a microcomputer system. . . .

3. Journalize on a microcomputer daily transactions in the appropriate journal and post to the general ledger accounts. . . .

4. Print month-end reports and documents to include an unadjusted trial balance, an adjusted trial balance, income statement, balance sheet, schedule of accounts receivable and accounts payable, checks, and customer statements. . . .

5. Perform year-end operations by journalizing and posting adjustments to the general ledger, print financial statements, close all nominal accounts and update records, print post-closing trial balance, and delete unwanted accounts. . . .

Ms. Muller testified that the Competencies for ACC115 described a bookkeeping class, not an upper level accounting class. Ms. Rios testified that she has taught introductory accounting at Glendale Community College. A student must transfer community college credits to a four-year university to apply those credits to a baccalaureate degree. With a few exceptions, all community college courses are lower level. Ms. Rios admitted that she had never taught ACC115 at Glendale Community College but testified that she had taught ACC211, which was a lower level course. Ms. Foroughi testified that ACC115 covered Quickbooks and was similar to a continuing accounting education course that the Board had approved for practicing CPAs. She argued that, if the course would have qualified for continuing education for CPAs, it must be an upper level course. Ms. Muller responded that continuing education are not university courses taken for credit, but instead consist of several hours of presentation on topics of general interest to accountants. In contrast, university courses usually met for several hours each week, were graded, and provided university credits. Ms. Foroughi also pointed out that a prerequisite for ACC115 was ACC107 or upper level accounting. Ms. Muller responded that A.A.C. R4-1-343(A)(5) also excluded from the definition of upper level courses in accounting “principles of accounting or similar courses.” Ms. Muller testified that ACC115 was about the principles of accounting or a similar course. Ms. Foroughi argued that Quickbooks was not a basic accounting principle. She should have been given credit for ACC115 as an upper level course. The American Graduate School of International Management WB120, “Financial Statement Analysis”

Ms. Muller admitted that all the courses at the American Graduate School of Management had the prefix “WB” for “World Business.” The prefix was not determinative, however, and the Certification Advisory Committee had looked at the content of the course. The course description for WB5120, Financial Statement Analysis, provided as follows: This course presents a comprehensive treatment of the analysis of financial statements as an aid to investigating and lending decisions. It focuses on understanding the financial statements of domestic, multinational and foreign organizations, as well as methods by which they are analyzed and interpreted. Prerequisites: WB3200 and WB3210 and WB4150 or equivalents.

Ms. Muller admitted that one of the prerequisites for WB5120 was intermediate accounting. But she denied that made WB5120 an upper level course. Ms. Muller testified that she had looked up the textbook for WB5120 at the publisher’s website and learned that it was marketed as a finance textbook. Ms. Muller testified that the course description indicated that WB5120 was more of a finance course than an accounting course, although she admitted that she had never taught finance. The PowerPoint presentation that Ms. Foroughi had submitted to the Board also indicated that WB5120 was a finance course. Ms. Muller testified that the Board had given Ms. Foroughi three hours’ credit for WB5120 as a “related course” under A.R.S. § 32-721(B)(2)(b). Ms. Muller testified that she has been teaching accounting for 18 years at ASU. She used her professional judgment to decide that WB5120 was not an upper level accounting course. Ms. Foroughi argued that accountants analyze financial statements. She should have been given credit for WB5201 as an upper level accounting course. The Experience Requirement Ms. Foroughi had submitted four COEs with her application as follows: (1) A COE signed by Robert C. Hubbard, CPA; (2) a COE signed by Steven F. White, the Human Resources Director at EFTC now Suntron Corp.; (3) a COE signed by Roy E. Wiseman, Tax Director – Excise & Sales Tax for ConocoPhillips; and (4) a COE signed by Linda Miller, the Custodian of Personnel Records for the City of Phoenix. The Hubbard COE The Hubbard COE was signed by Robert C. Hubbard, Arizona CPA Certificate Number 704R, and stated that Ms. Foroughi had worked part-time at Robert C. Hubbard, P.C. between August 2005 and March 2006, on average 95 hours/month, as a staff accountant and tax preparer in public accounting. Mr. Hubbard indicated that Ms. Foroughi’s experience had included examining financial statements as defined by A.A.C. R4-1-343(A)(3) but had not included reporting on financial statements by expressing a formal opinion, as defined by A.A.C. R4-1-343(A)(4). Ms. Muller testified that, based on the definition set forth in A.A.C. R4- 1-343(A)(2), the Board calculated the part-time equivalent of a years’ experience in accounting to be 1500 hours (30 hours/week times 50 weeks/year). Based on Mr. Hubbard’s avowal, the Board gave Ms. Foroughi credit for 760 hours of accounting experience (95 hours times 8 months), which included experience in examining financial statements. Ms. Muller testified that the Board requires that applicants have some experience in reporting financial statements during their total of one year’s experience in the practice of accounting. Although the Board had given credit to Ms. Foroughi for Mr. Hubbard’s COE, it did not fulfill the Board’s requirements because it was for less than a year and included no reporting experience. The Suntron Corp. COE The Suntron Corp. COE indicated that, between December 1999 and October 2001, Ms. Foroughi had been employed more than 30 hours per week as a staff accountant. Mr. White’s COE indicated that “[t]his company only reports neutral employment information. Mr. White indicated that he was Suntron’s Corp.’s Director of Human Resources. Mr. White attached to the COE a reference letter dated December 3, 2001 in relevant part as follows: During her employment with EFTC, [Ms. Foroughi] demonstrated full competence in her technical and functional knowledge, planning and organization skills, and project management. In addition she demonstrated excellence in using applications to collect and provide valuable information, in continuously gaining better understanding of how Oracle transactions are performed and generating useful reports once the data is collected.

Mr. White’s COE did not indicate whether or not Ms. Foroughi had examining or reporting experience but referred to the attached reference letter. Ms. Muller and Ms. Rios testified that the Board did not give Ms. Foroughi credit for any experience for the Suntron Corp. COE because Mr. White was not a CPA and had not provided any evidence to allow the Board to determine whether his education and work experience were the equivalent of a CPA. Ms. Muller and Ms. Rios testified that, in addition, the Suntron Corp. COE did not indicate that Ms. Foroughi had experienced examining or reporting on financial statements, which was required. Ms. Foroughi testified that Mr. White was a CPA licensed in another state. Suntron Corp. had not responded to her subpoena for Mr. White’s CPA certificate number. Ms. Foroughi had a subpoena issued for the testimony at the hearing of Paul Ferino, her former supervisor at Suntron Corp. Mr. Ferino did not comply with the subpoena. The Administrative Law Judge explained that the legislature had not given her contempt powers to enforce subpoenas but that Ms. Foroughi would have to enforce the subpoena in superior court. The ConocoPhillips COE The ConocoPhillips COE was signed by Ray E. Wiseman, Tax Director – Excise & Sales Tax and indicated that, between March 23, 1998 and March 23, 1999 Ms. Foroughi had been employed more than 30 hours/week by ConocoPhillips as a Staff Accountant, Tax Preparer, and doing “tax system tax rate and customer set up.” The ConocoPhillips COE indicated that Ms. Foroughi had not gained experience in examining financial statements and offered the following explanation: This department does not review or examine financial statements. The focus of this department is excise and sales tax compliance. To the extent necessary to complete such, there is review made of balance sheet accounts relating to the taxes being reported.

The ConocoPhillips COE indicated that Ms. Foroughi had not gained experience in reporting on financial statements because “[t]his department does not issue financial statements.” Mr. Wiseman indicated on the ConocoPhillips COE that, although he was not a CPA, he had “24 years in accounting and preparing tax returns.” Mr. Wiseman did not provide a curriculum vitae or other description of his education and work experience. Ms. Muller and Ms. Rios testified that the Board did not give Ms. Foroughi credit for any experience for the ConocoPhillips COE because Mr. Wiseman was not a CPA and had not provided any evidence to allow the Board to determine whether his education and work experience were the equivalent of a CPA. The Board requires such documentation. Ms. Muller testified that, although Mr. Wiseman indicated that he had “24 years in accounting and preparing tax returns,” an employee of H&R Block who only handed individual tax returns to preparers for 24 years could say the same. Ms. Muller and Ms. Rios testified that, in addition, the ConocoPhillips COE did not indicate that Ms. Foroughi had experienced examining or reporting on financial statements, which was required. The City of Phoenix COE The City of Phoenix COE was signed by Linda Miller, Custodian of Personnel Records and indicated that, between June 26, 1989 and June 21, 1993 Ms. Foroughi had been employed more than 30 hours/week by the City of Phoenix as a Staff Accountant. The City of Phoenix COE indicated that Ms. Foroughi had not gained experience in examining or reporting on financial statements. In response to the section that asked Ms. Miller to describe her employment relationship with Ms. Foroughi, Ms. Miller responded as follows: We are unable to fill out your form. The only records we have are dates of employment and job titles. In accordance with Arizona State record retention, personnel records are destroyed six years following the date of separation. Ms. Foroughi has been gone more than six years.

Ms. Muller testified that the Board did not give Ms. Foroughi credit for any experience for the City of Phoenix COE because Ms. Miller was not a CPA and had not personally supervised Ms. Foroughi. Ms. Muller testified that, in addition, the City of Phoenix COE did not indicate that Ms. Foroughi had experienced examining or reporting on financial statements, which was required. Additional Evidence and Argument Ms. Foroughi passed all four sections of the CPA examination on her third try, in May 2008. She argued that passing the examination is the primary requirement for certification as a CPA. Ms. Muller admitted that, as part of an accountant’s job functions, she may review, prepare, and audit financial statements. Ms. Muller and Ms. Rios testified that the Board requires accountants to have experience in examining and reporting on financial statements because those functions are included in the definition of accounting in A.R.S. § 32-701(11) and further defined in A.A.C. R4-1-343(A)(3) and (4). Ms. Foroughi testified that she has been employed for more than three years as an accountant, analyzing and preparing financial information and statement. Ms. Foroughi had several subpoenas issued to her former employers to obtain accurate COEs based on her actual job responsibilities. Unfortunately, the subpoenas did not result in any alteration of the COES. Ms. Foroughi testified that she had taken a few years off from outside work to care for her mother, who subsequently died. Her absence from the workforce has made it impossible for her to secure employment in the accounting profession. Instead, she has been working in healthcare. Ms. Foroughi argued that the Board should not have disregarded the COEs, which showed substantial experience in accounting. She also had submitted work samples to the Board, which neither Ms. Muller, Ms. Rios, nor the Board had considered. Ms. Foroughi also had submitted a sworn statement about her relevant work experience, which the Board had not considered. Ms. Rios testified that she did not rely upon Ms. Foroughi’s sworn statement because it did not meet the requirements of A.R.S. § 32-721(B) and A.A.C. R4-1-343(B). Ms. Foroughi testified that she was trying to deal with the Board in good faith. She was willing to take additional courses if necessary. However, with respect to employment experience, she should not be penalized for her former employers’ unavailability or refusal to describe her work experience accurately, especially since she cannot force her former supervisors to comply with the subpoenas she had issued or to describe her work experience truthfully. Her work experience should be considered “in its totality.” CONCLUSIONS OF LAW This matter lies within the Board’s jurisdiction to resolve.[1] Ms. Foroughi bears the burden of proof and must establish that she meets statutory and regulatory requirements for certification as a CPA by a preponderance of the evidence.[2] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[3] A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”[4] An agency’s interpretation of a statute that it is authorized to enforce and application of a regulation that it has promulgated pursuant to statutory authority are normally entitled to great deference.[5] The Board’s requirement in A.A.C. R4-1-343(B) that an applicant’s employment experience must be established by COEs completed by persons who both possess personal knowledge of the applicant’s work and are able to confirm the applicant’s accounting experience because they are either CPAs or have documented education and experience similar to a CPA is a reasonable interpretation of A.R.S. § 32-721(B)(1). The Board’s requirement that the applicant’s experience include both examining and reporting experience as defined by A.A.C. R4-1-343(A)(3) and (4) is a reasonable interpretation of the requirements of A.R.S. §§ 32- 721(B)(1) and 32-701(11). The Board’s conclusions that Glendale Community College ACC115 and Thunderbird, The International Graduate School of International Management WB5120 are not upper level accounting courses were supported by the evidence at hearing. Ms. Foroughi has established that she is an intelligent, well-educated woman with substantial experience in the accounting profession. She has also established that, due to the passage of time and her former employers’ recalcitrance, it may not be possible for her to establish that she meets the Board’s requirements to be certified as a CPA. Ms. Foroughi’s inability to obtain the evidence that applicable statute and regulation require may be unfortunate. But, because the Board’s primary purpose is “protecting the citizens of this state from inept and unlawful accounting practices,”[6] the Board properly cannot infer from Ms. Foroughi’s own statements or inability to obtain independent third-party evidence that such evidence would have shown that she has met applicable statutory and regulatory requirements. As noted above, Ms. Foroughi bears the burden of proof in this matter. On this record, Ms. Foroughi has not established that she meets statutory and regulatory requirements for certification as a CPA or that the Board erred in denying her application for certification. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Board affirm its denial of Ms. Foroughi’s application for certification as a CPA and dismiss this appeal. Done this day, August 3, 2009.

______________________________________ Diane Mihalsky Administrative Law Judge

Original transmitted by mail this ____ day of August, 2009, to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy 100 N. 15th Ave., Ste. 165 Phoenix, AZ 85007

By __________________________ ----------------------- [1] See A.R.S. § 32-702(A); A.R.S. § 32-703(B)(6). [2] See A.R.S. § 41-1092.07(G)(1); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [3] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [4] Black’s Law Dictionary at page 1220 (8th ed. 1999). [5] See Eastern Vanguard Forex, Ltd. v. Arizona Corporation Commission, 206 Ariz. 399, 410, ¶ 35, 79 P.3d 86, 97 (App. 2003) (citing Better Homes Constr., Inc. v. Goldwater, 203 Ariz. 295, 399, ¶ 15, 53 P.3d 1139, 1143 (App. 2002); Berenter v. Gallinger, 173 Ariz. 75, 77, 839 P.2d 1120, 1122 (App. 1992)). [6] Laws 1990, Ch. 81, § 1.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826