case audit

Topics: Colorado, Accountant, Certified Public Accountant Pages: 20 (6092 words) Published: November 15, 2013
Gale A. Norton, Attorney General
Martha Phillips Allbright, Chief Deputy Attorney General
Richard A. Westfall, Solicitor General
Merrill Shields, Deputy Attorney General
Linda A. Siderius, First Assistant Attorney General
Victoria R. Mandell, Assistant Attorney General
Regulatory Law Section
Denver, Colorado
Attorneys for Petitioner
Isaacson Rosenbaum Woods & Levy, P.C.
Sheldon E. Friedman
Scott S. Evans
Denver, Colorado
Attorneys for Respondent
Kevin O. O'Brien
Boulder, Colorado
Attorney for Amicus Curiae American Civil Liberties Union Foundation of Colorado, Inc. Rothgerber, Appel, Powers & Johnson, LLP
Frederick J. Baumann
JoAnn L. Vogt
Denver, Colorado
Attorneys for Amicus Curiae American Institute of Certified Public Accountants Allen & Pinnix, P.A.
Noel L. Allen
Raleigh, North Carolina
Attorneys for Amicus Curiae National Association of State Boards of Accountancy JUSTICE HOBBS delivered the Opinion of the Court.
JUSTICE SCOTT does not participate.
The Colorado State Board of Accountancy (Board) appeals from a decision by the court of appeals allowing the accounting firm of Zaveral Boosalis Raisch (ZBR) to use the accountant-client privilege, see § 13-90-107(1)(f)(I), 5 C.R.S. (1997), to refuse compliance, absent the client's consent, with a subpoena issued by the Board. The Denver District Court interpreted exercise of the Board's subpoena power, see § 12-2-126(1)(a), 4 C.R.S. (1997), as an exception to the accountant-client privilege. In the absence of express legislative language creating an exception, the court of appeals declined to imply one. See Colorado State Bd. of Accountancy v. Zaveral Boosalis Raisch, 931 P.2d 498, 500 (Colo. App. 1996).(1) We agree and affirm. I.

The Board received an unsigned letter alleging improprieties in the accounting practices of ZBR in connection with two casinos. The writer of this letter accused ZBR of violating accepted accounting principles and of preparing deficient auditing statements which investors and lenders relied upon to their detriment and which the Colorado Gaming Commission also relied on in issuing gaming licenses. In addition, the writer alleged that federal withholding taxes for the businesses were not paid, that Colorado unemployment taxes were not paid, that gaming returns had not been filed or paid, and that ZBR was responsible for these failures. The Board initiated an investigation into ZBR's accounting practices and issued a subpoena duces tecum to ZBR requiring the production of ZBR's files. The subpoena applied to: all tax returns, K-1's, audit reports and opinions, financial statements, notes, workpapers, correspondence with the client, the IRS and Colorado Department of Revenue, reports to the Gaming Division, calculations, and all other documentation used or prepared in connection with these engagements. ZBR objected to the subpoena and filed a Motion For More Definite Statement with the district court. ZBR argued that the Board had not specified whether or not ZBR's clients had waived the accountant-client privilege and, without such a waiver, ZBR could not produce documents protected by the privilege because the privilege is "unqualified."(2) The Board argued to the district court that subpoenas directed to the accountant's work product and underlying client documents are essential to the Board's ability to investigate CPA compliance with the act and Board regulations. The Board invoked its rule of professional conduct requiring CPA compliance with subpoenas and Board investigations. In concluding that the statute providing the Board with the subpoena power operates as an exception to the accountant-client privilege in Colorado, the district court reasoned that requiring the Board to obtain client consent to a CPA subpoena would "severely hamper[]" the ability of the Board to carry out its statutory investigatory and disciplinary duties. The court of appeals held that a court, in the absence of statutory authority, cannot...
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