Ron L. Beaulieu & Co. v. N.H. Bd. of Accountancy, 2018-0332

• Decision Date: 25 June 2019
• Docket Number: No. 2018-0332,2018-0332
• Citation: 172 N.H. 284,212 A.3d 929
• Parties: RON L. BEAULIEU & COMPANY v. NEW HAMPSHIRE BOARD OF ACCOUNTANCY
• Court: New Hampshire Supreme Court

172 N.H. 284

212 A.3d 929

RON L. BEAULIEU & COMPANY

v.NEW HAMPSHIRE BOARD OF ACCOUNTANCY

No. 2018-0332

Supreme Court of New Hampshire.

Argued: April 18, 2019

Opinion Issued: June 25, 2019

Vanacore Law Office, of Concord (John G. Vanacore on the brief and orally), for the plaintiff.

Gordon J. MacDonald, attorney general (Seth M. Zoracki, assistant attorney general, on the brief and orally), for the defendant.

HANTZ MARCONI, J.

The plaintiff, Ron L. Beaulieu & Company, appeals an order by the Superior Court (Kissinger, J.) affirming an order of the New Hampshire Board of Accountancy. The Board suspended the plaintiff's license to do business in New Hampshire for three years and imposed a $5,000 fine after concluding that the plaintiff committed professional misconduct by failing to retain work papers and records for five years and by failing to properly conduct auditing services for Tri-County Community Action Program (TCCAP) from 2008-2011. We affirm.

The trial court recited the following facts. Ron Beaulieu is a licensed certified public accountant (CPA) in Maine who owns Ron L. Beaulieu & Company, which is licensed to do business in New Hampshire. TCCAP is a New Hampshire voluntary corporation registered as a charity with the Charitable Trusts Unit (CTU) of the Attorney General's Office. TCCAP retained Beaulieu to provide auditing services for the agency from 2008 to 2011. Each year the plaintiff performed financial statement audits and compliance audits as of June 30.

In December 2012, the Attorney General received notice of serious financial problems at TCCAP and subsequently initiated an investigation. In January 2013, the plaintiff received a letter from a Special Trustee for TCCAP appointed by the Probate Court at the behest of the New Hampshire Attorney General advising it to "immediately place [its] insurance carriers on notice of potential claims from TCCAP based upon the audits and services [it] performed for TCCAP." In July 2015, following the investigation, the Attorney General issued a report (Report) revealing that a number of factors contributed to TCCAP's financial failure, including the plaintiff's "incomplete and inaccurate reports" and failure "to detect or report internal control weaknesses and improper accounting procedures."

The Board of Accountancy initiated an investigation after it became aware of allegations that the plaintiff had failed to properly conduct auditing services for TCCAP. See RSA 309-B:11, I (2015). The Board found that there was probable cause to commence a disciplinary proceeding, see RSA 309-B:12, I (2015), and held a hearing in April 2017 at which Beaulieu and Thomas Musgrave, a member of the Board who assisted with the investigation and was therefore recused from deliberating with the Board, testified. A number of exhibits, including the Report, were admitted into evidence, and the Board Chair stated the Board would give "weight to them as [it] deem[ed] appropriate."

In July 2017, the Board issued its Final Decision and Order. In it, the Board unanimously concluded that New Hampshire Administrative Rule, Ac 404.03(g) required the plaintiff to keep all records related to the audits of TCCAP for a minimum of five years, and, therefore, its failure to "retain work papers and/or all records of [its] work file for all audits conducted of TCCAP" for a five-year period constituted professional misconduct. See N.H. Admin. R., Ac 404.03(g) ("A CPA shall ensure that the work product and the work papers created in the performance of an engagement for a client are retained for a minimum of 5 years after creation unless the CPA is required by law to retain such records for a longer period."). The Board reasoned that after Beaulieu received notice in January 2013 that TCCAP may file a claim, "at a minimum, he should have ensured that no records were destroyed, including but not limited to his work file, that recorded his notes documenting the basis for his findings.... However, [Beaulieu] did not even ensure that the required work file [was retained] for three years [the time period he told the Board he thought was applicable under federal law] as he himself conceded."

The Board also unanimously concluded that the plaintiff "was in violation of ... RSA 309-B:10, I-a(e) and/or (j) in that he committed professional misconduct in failing to properly conduct auditing services for TCCAP for fiscal years 2008 through 2011." The Board noted that the plaintiff's 2008 audit did not disclose the reason for a $1.6 million prior period adjustment, and that Beaulieu agreed at the hearing that the failure to include a disclosure was a mistake. The Board also found that the plaintiff's 2011 audit "misstated the financial condition of [TCCAP] resulting in over $516,000.00 of unfavorable prior period adjustment[s] for the FY 2012 audit, including [an] overstatement of cash of $460,000.00." The Board stated that Beaulieu was "unable to explain" these "unfavorable periods of adjustments" at the hearing. The Board also noted that the subsequent auditor identified more than twenty "material weaknesses specifically related to the findings of systems of internal controls of the agency," and therefore the plaintiff's "audit finding that TCCAP was low risk for those years was inaccurate." Finally, the Board referred to a statement in the Report about TCCAP's financial failure which indicated that the plaintiff prepared incomplete and inaccurate reports and otherwise failed to detect certain issues with TCCAP's internal controls and accounting procedures. The Board unanimously voted to impose sanctions including a three-year license suspension and a $5,000 fine. The Board subsequently denied the plaintiff's motions to reconsider, stay, and dismiss charges of misconduct.

The plaintiff appealed to the superior court. See RSA 309-B:12, X (2015) (allowing a person or firm adversely affected by a Board order entered after a hearing to appeal by filing a written petition with the superior court). It argued, among other things, that the Board misinterpreted the relevant statutes and administrative rules related to record retention, that the Board's conclusions regarding the quality of its audit work were unreasonable or unlawful, and that the Board unlawfully shifted to the plaintiff the burden of proving that it had not engaged in professional misconduct. The court affirmed those portions of the Board's order at issue in this appeal and this appeal followed.

On appeal, the plaintiff argues that RSA 309-B:19 (2015) and Ac 404.03(g), when properly interpreted, require retention of client records for five years but do not "define a retention period for auditors' proprietary Audit Work Papers." Alternatively, it asserts that if Ac 404.03(g) does apply to auditor work papers, the rule is unlawful because it adds to the statute and therefore exceeds the Board's rulemaking authority. It also contends that the court lacked "substantial evidence" demonstrating that the 2008-2011 audits of TCCAP constituted professional misconduct because the Board had to identify "facts which constitute professional misconduct," and not just rely upon conclusions in the Report which, it asserts, was not admitted into evidence. The plaintiff contends that no other evidence supports the conclusion that it committed professional misconduct. It further asserts that the Board, in stating that "[t]here was insufficient evidence, if any, submitted by [the plaintiff] to rebut [evidence of professional misconduct]," erred as a matter of law because it improperly shifted the burden of proof.

RSA 309-B:12, X specifies that the superior court reviews an appeal brought under the statute "pursuant to the procedures and standards of RSA 541." RSA 309-B:12, X. Therefore, the superior court — having chosen not to exercise its right to order a trial de novo — was obligated to treat the factual findings of the Board as prima facie lawful and reasonable and could not set aside its decision absent unreasonableness or an identified error of law. RSA 541:13 (2007). The superior court's task was not to determine whether it would have found differently or to reweigh the evidence, but rather to determine whether the findings were supported by competent evidence in the record. Appeal of Dell, 140 N.H. 484, 498, 668 A.2d 1024 (1995).

RSA 309-B:12, X does not specify a standard for us to apply when reviewing appeals of the superior court's decision. Therefore, as we have in other cases where the superior court has deferentially reviewed a decision of an administrative board, we will uphold the superior court's decision unless it is unsupported by the evidence or is legally erroneous. See Dietz v. Town of Tuftonboro, 171 N.H. 614, 618, 201 A.3d 65 (2019) (applying standard in appeal of trial court review of zoning board decision); Ltd. Editions Properties v. Town of Hebron, 162 N.H. 488, 491, 34 A.3d 688 (2011) (applying standard in appeal of trial court review of planning board decision). At the same time, we review interpretations of both statutes and administrative rules de novo. See Appeal of Cole, 171 N.H. 403, 412, 196 A.3d 950 (2018).

We use the same principles of construction when interpreting both statutes and administrative rules. Bach v. N.H. Dep't of Safety, 169 N.H. 87, 92, 143 A.3d 246 (2016). In construing rules, as in construing statutes, where possible we ascribe the plain and ordinary meaning to the words used. Id. We interpret intent from the statute or rule as written and will not consider what the enacting body might have said or add language that the enacting body did not see fit to include. See Appeal of New England Police Benevolent Ass'n, 171 N.H. 490, 493, 198 A.3d 905 (2018).

With these principles in mind, we first consider the plaintiff's arguments regarding the applicable retention period for auditing work papers. Although Ac 404.03 is titled "Retention of Client Records," the plain text of the rule refutes the plaintiff's argument that...