ALJDEC decisions subject to certification as final

10F-2010.106-ACY · State Board of Accountancy · 2010-07-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 8, 2010 at 8:00 a.m. APPEARANCES: Applicant Matthew D. Smith appeared on his own behalf; the Arizona State Board of Accountancy appeared through Seth T. Hargraves, Esq., Assistant Attorney General. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure A.R.S. § 32-702(A) authorizes the Arizona State Board of Accountancy (“the Board”) to administer and to enforce statutes relating to Certified Public Accountants (“CPA”). A.R.S. § 32-703(B)(6) authorizes the Board to “[i]ssue to qualified applicants certificates . . . .” On March 26, 2010, the Board received Matthew D. Smith’s application for Certification as a CPA by examination. On May 3, 2010, the Board issued an order denying Mr. Smith’s application based on the recommendation of the Board’s Certification Advisory Committee (“the Committee”), that Mr. Smith “had failed to meet the education requirements as the college and university transcripts only documented 27 semester hours of upper level accounting courses.” Mr. Smith timely appealed the Board’s denial. Pursuant to A.R.S. §§ 41-1092(7)(a) and 41-1092.01(E), the Board referred Mr. Smith’s appeal to the Office of Administrative Hearings, an independent state agency, to schedule and to conduct a fair hearing. On March 3, 2010, the Board issued a Notice of Public Hearing on the issue of whether Mr. Smith had met the Board’s educational requirements for upper level accounting courses. A hearing was held on July 8, 2010. Mr. Smith testified on his own behalf and submitted one exhibit. The Board presented the testimony of two witnesses: (1) Deputy Director Jim Dubé; and (2) Nancy Maurer, CPA, a member of the Committee who had recommended that the Board deny Mr. Smith’s application. The Board also submitted seven exhibits. Hearing Evidence Mr. Smith submitted with his application for certification a transcript from the University of Phoenix, which had awarded him a Bachelor of Science degree in Business/Accounting in 2004. When the Board received Mr. Smith’s application, Board staff determined that it was administratively complete and forwarded it to the Committee for review. Mr. Dubé testified that staff is not qualified to determine whether an applicant meets the Board’s substantive requirements for certification. At the Committee’s request, staff obtained course descriptions for accounting courses that Mr. Smith had taken at the University of Phoenix. The course number, names, and descriptions for the three courses at issue are set forth below: a. ACC 330, Accounting for Decision Making, “introduces cost terminology and flows, standard cost systems, relevant costing, budgeting, inventory control, capital asset selection, responsibility accounting, and performance measurement”;

b. AAC 362, Financial Accounting I, “covers the fundamentals of financial accounting as well as the identification, measurement, and reporting of the financial effects of economic events on the enterprise”; and

c. ACC 363, Financial Accounting II, “introduces plant assets, liabilities, accounting for corporations, investments, statements of cash flows, financial statement analysis, time value of money, payroll accounting, and other significant liabilities.”

Ms. Maurer and another Committee member reviewed Mr. Smith’s transcripts. Based on the course descriptions, the Committee recommended that the Board deny Mr. Smith’s application. The University of Phoenix system designates courses that are numbered 300- 499 as Junior and Senior Level courses. Mr. Smith submitted a letter from the University of Phoenix Registrar stating that ACC 330, ACC 362, and ACC 363 were upper division credit courses. Ms. Maurer testified that under A.R.S. § 32-721 and A.A.C. R4-1- 343(A)(5), Committee members do not rely on a school’s course numbering system because different schools have different numbering systems. Ms. Maurer testified that, instead, Committee members rely on course names and descriptions. As an example, Ms. Maurer testified that the Committee had considered the three classes named Intermediate Financial Accounting I, II, and III on Mr. Smith’s transcript to be upper level, because they were beyond the basic or entry level. Ms. Maurer testified that, in contrast, ACC 330 had no prerequisites for enrollment. Course descriptions that include the words “fundamental” or “introduces” indicate that the content of the course is basic, not upper level course. Mr. Smith testified that he had taken the Becker review course to prepare for the CPA examination. If he had known that he lacked three upper level accounting course hours needed for certification, he would have taken the review course for credit. Board staff had not told him that he did not have enough upper level accounting course hours for certification when he applied to take the CPA examination. Mr. Dubé testified that staff does not know whether a person who applies to take the CPA examination has completed his education or whether he plans to apply for certification in Arizona. Applications to take the CPA examination are governed by a different statute than applications for certification. CONCLUSIONS OF LAW This matter lies within the Board’s jurisdiction to resolve.[1] Mr. Smith bears the burden of proof and must establish that he 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] A.R.S. § 32-721(B)(2)(a) requires that for CPA certification, a person must complete at least 30 semester hours of upper-level accounting courses. A.A.C. R4-1-343(A)(5) provides as follows: “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 introductory accounting courses.

An agency’s interpretation of a statute that it is authorized to enforce, and application of a regulation that it has promulgated pursuant to its statutory authority, are normally entitled to great deference.[5] The Board’s conclusion that the University of Phoenix course nos. ACC 330, ACC 362, and ACC 363 are not upper-level accounting courses as defined by A.A.C. R4-1-343, was supported by the evidence at hearing. The coursework required to sit for the CPA examination is set forth in A.R.S. § 32-723(B).[6] These educational requirements differ from the requirements for certification set forth in A.R.S. § 32-721. No statute or regulation requires the Board to advise a person who submits an application to sit for the CPA examination whether, if he passes the examination, he would also meet requirements for certification. As noted above, Mr. Smith bears the burden of proof. On this record, Mr. Smith has not established that he meets statutory and regulatory requirements for certification as a CPA. RECOMMENDED ORDER Based on the foregoing, it is recommended that the Board affirm its denial of Mr. Smith’s application for certification as a CPA and dismiss this appeal. Done this day, July 27, 2010.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy ----------------------- [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. R4-1-344(4); 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] This statute requires that to sit for the CPA examination, an applicant must provide to the Board evidence of having completed “at least twenty- four semester hours in accounting courses of which twelve semester hours must be in intermediate accounting theory, advanced accounting, cost accounting, auditing theory and practice or income taxes, or any combination thereof, or advanced accounting courses equivalent thereof . . . .” A.R.S. § 32-723(B) does not mention “upper level accounting courses.”

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