Quad City Bank & Trust v. Jim Kircher & Associates, P.C.

IN THE SUPREME COURT OF IOWA

No. 09–1151

Filed September 23, 2011

QUAD CITY BANK & TRUST,

Appellant,

vs.

JIM KIRCHER & ASSOCIATES, P.C.,

Appellee.

On review from the Iowa Court of Appeals.

Appeal from the Iowa District Court for Dubuque County,

Lawrence H. Fautsch, Judge.

An accounting firm seeks further review of a court of appeals

decision granting a bank a new trial. DECISION OF COURT OF

APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED.

Robert V.P. Waterman, Jr., and Thomas D. Waterman (until

withdrawal) of Lane & Waterman LLP, Davenport, for appellant.

Les V. Reddick of Kane, Norby & Reddick, P.C., Dubuque, for

appellee.

2

WIGGINS, Justice.

A bank attempted to prove an accounting negligence claim by

using an expert witness to testify regarding the accountant’s audit of a

company. The district court refused to allow the expert to testify as to

generally accepted Certified Public Accountant (CPA) auditing standards,

whether the accountant breached those standards, and causation. The

district court left open the question of whether the expert could testify as

to the accountant’s work papers. At trial, the bank made an offer of

proof as to the work papers, but did not move to introduce them, so the

court never ruled on their admissibility. The bank received an adverse

jury verdict and appealed. We transferred the case to the court of

appeals. The court of appeals reversed the district court and remanded

for a new trial. On further review, we hold the bank failed to preserve

error on the work-paper issue. Additionally, we hold the expert was not

qualified to testify as to generally accepted CPA auditing standards,

whether the accountant breached those standards, and causation.

Therefore, we vacate the decision of the court of appeals and affirm the

judgment of the district court.

I. Background Facts and Proceedings.

Keith Chapman owned Chapman Lumber Company, Inc., a lumber

business located in Hopkinton. In February 2003 Quad City Bank &

Trust (QCBT) provided Chapman Lumber with a $500,000 line of credit.

In July QCBT loaned Chapman Lumber $1,935,000. The United States

Department of Agriculture (USDA) guaranteed eighty percent of this loan.

In September QCBT increased Chapman Lumber’s line of credit to

$750,000. As of October QCBT was aware Chapman Lumber defaulted

on the $1,935,000 loan. Nevertheless, QCBT decided not to foreclose on

the loan at that time.

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As a condition of its guarantee, the USDA required a general audit

of Chapman Lumber. Accordingly, on October 1 Chapman Lumber hired

Jim Kircher & Associates, P.C. to perform a general audit for its fiscal

year ending on June 30, 2003. According to Kircher, the objective of the

audit was to express “an opinion about whether [Chapman Lumber’s]

financial statements [were] fairly presented in all material respects, in

conformity with U.S. generally accepted accounting principles.” Brian

Feltes, a CPA and employee of Kircher, performed the audit. QCBT relied

on the audit to validate Chapman Lumber’s financial performance and to

decide whether to keep working with Chapman Lumber. In late

December QCBT saw a preliminary version of the audit report. Kircher

did not issue the final report until late January 2004. The audit showed

that, for fiscal year 2003, Chapman Lumber had overdrafts of $59,474

and a deficit cash flow of $85,306.

By the end of January, Chapman Lumber was also in default on

the $750,000 line of credit. Subsequently, QCBT informed Chapman

Lumber that they had thirty days to acquire an infusion of venture

capital or QCBT would foreclose on the loans. However, rather than

foreclosing on the loans after the thirty days expired, QCBT entered into

a forbearance agreement with Chapman Lumber. The agreement

provided that QCBT would not foreclose on its loans as long as Chapman

Lumber procured an injection of venture capital.

In April Chapman Lumber suffered a substantial fire that

destroyed its kilns, which were central to its operations. These events

left QCBT with a decision. It could either recoup the insurance proceeds

and liquidate Chapman Lumber or reinvest the proceeds into the

business and keep Chapman Lumber operational. QCBT chose to keep

Chapman Lumber operational due to the increased efficiency from newly

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installed kilns and the expectation that Chapman Lumber would receive

a substantial venture capital investment. While it was waiting for the

insurance proceeds, Chapman Lumber procured a short-term loan of

$150,000 from QCBT to be paid back in ninety days.

In January 2005 the forbearance agreement expired. Chapman

Lumber had not yet secured a venture capital investment. Thus, QCBT

called its loans with Chapman Lumber due. Subsequently, Chapman

Lumber filed for bankruptcy protection. In March QCBT went to

Chapman Lumber’s premises to check on its collateral. During this

check, QCBT discovered that Chapman Lumber had been defrauding the

bank. QCBT found inventory at the facility, but Chapman Lumber did

not own the inventory. Following this discovery, QCBT made a concerted

effort to investigate Chapman Lumber’s finances. QCBT learned that

Keith Chapman had a personal Wells Fargo bank account through which

he funneled approximately $600,000 of the company’s money for his own

personal expenses. Ultimately, QCBT netted $1,289,213 from Chapman

Lumber’s liquidation.

QCBT filed an accounting negligence claim against Kircher. QCBT

alleged that Kircher negligently performed its fiscal-year-2003 audit of

Chapman Lumber because it failed to discover and accurately convey the

true financial condition of Chapman Lumber. QCBT claimed it relied on

Kircher’s audit when it delayed foreclosure on its loans with Chapman

Lumber and, if it had known of the company’s lack of inventory and

fraud, it would have liquidated the company at the time of the fire.

Furthermore, QCBT asserted that, had it liquidated in 2004 at the time

of the fire, it would have netted $912,270.10 more than the $1,289,213 it

netted in the 2005 liquidation.

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QCBT identified Kerry Bolt as an expert witness. Bolt was a

certified fraud examiner, but not a CPA. Bolt began his career as a

revenue agent for the Internal Revenue Service (IRS), where he conducted

field audits of income tax returns of individuals and businesses. Bolt

then became an IRS special agent and conducted criminal investigations

of income tax fraud, money laundering, and terrorist financing.

Subsequently, he retired from the IRS and started a forensic accounting

business. In relation to this case, Bolt reviewed all of Feltes’s work

papers, as well as other records, to determine whether Feltes sufficiently

examined Chapman Lumber’s internal controls, inventory, and risk of

fraud.

Thirteen days before trial, Kircher filed a motion in limine seeking

to prohibit QCBT from introducing “any evidence from plaintiff’s

designated expert Kerry Bolt with respect to standards of care applicable

to certified public accountants, whether that standard was breached, or

causation” and “any evidence from Kerry Bolt based upon his perceived

errors in [Feltes’s] work papers.” Kircher pointed to Bolt’s deposition

testimony as proof that he was unqualified to opine on whether Kircher

performed the audit according to generally accepted auditing standards.

In his deposition, Bolt testified he was not a CPA, had never performed a

general audit of a business, and was not familiar with CPA auditing

standards.

QCBT resisted the motion, arguing Bolt was qualified to opine that

Feltes failed to meet generally accepted auditing standards by failing to

adhere to the work papers. QCBT claimed that because Feltes admitted

in his deposition that the generally accepted auditing standards required

him to complete the work papers, Bolt could analyze Feltes’s work

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contained in the work papers to assure he did everything the work

papers required.

The district court held a hearing on the motion in limine on the

first morning of the trial. QCBT argued that Feltes and Kircher’s expert

stated that the way you comply with the applicable professional CPA

standards of care is to do as the work papers direct. Thus, QCBT

argued:

Bolt is not coming in as a typical expert to say the standard

of care for a certified public accountant doing an audit is the

following GAAP and GAAS standard was violated. He’s

coming in to say, I’m assuming that you have to do what

your work papers told you to do and here’s why that can’t

have been the case, and he is qualified to do that because

he’s a certified fraud examiner and he’s been running down

situations somewhat similar to this for a long time.

Accordingly, while QCBT agreed that Bolt was not qualified to testify as

to whether Kircher performed the audit negligently, it claimed Bolt could

testify as to whether Feltes did what the work papers required, assuming

the audit was supposed to be conducted pursuant to the work papers.

Kircher claimed this was a backdoor attempt to prove an auditor’s

professional negligence with an unqualified expert.

The court then ruled on Kircher’s motion in limine:

Plaintiff must still prove a violation of some generally

accepted auditing standard, and from what I’m able to read

from what has been given to me thus far in depositions of

Mr. Bolt, he is not an expert who can determine whether or

not an audit has been performed pursuant to some generally

accepted auditing standard because he’s not a CPA . . . . So

I don’t think that you can take a statement that was made

by a CPA and then bring Mr. Bolt into the picture and say,

well, based upon what he told me and then based upon

other investigations that I made, I’m of the opinion that . . .

this audit was not performed negligently . . . . I’m not saying

right off the top of my head, I guess, that Mr. Bolt cannot

testify period, but I’m just saying that he can’t testify to this

ultimate fact. And I really can’t say . . . at this stage what

my opinion would be in that regard because I just—with the

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fluidity of the trial process, it’s very hard for me to try to

figure out how this is all going to come out.

After this statement, Kircher asked for clarification on the court’s ruling,

to which the court replied, “Your motion is granted as to Bolt.” QCBT

then stated the court’s ruling left in doubt whether it could ask Bolt

about the contents of the work papers and whether the work papers

accurately reflected what actually happened. QCBT suggested the

parties could resolve this issue with an offer of proof of Bolt’s testimony

outside the presence of the jury. QCBT never made a pretrial offer of

proof, and the trial commenced.

At the close of its case, QCBT called Bolt to testify in an offer of

proof. Bolt stated he was prepared to testify about his credentials and

his review of Feltes’s work papers. He was further prepared to testify as

to whether the tasks outlined by the work papers had actually been

performed by Feltes and the inadequacies of Feltes’s inquiries and

conclusions as to Chapman Lumber’s internal controls, inventory, and

potential fraud. At the close of the offer of proof, QCBT stated, “That’s all

I have at this time . . . . I think that’s it. Thank you.” QCBT did not

renew its request to present Bolt’s testimony or elicit a further ruling

from the court as to the admissibility of Bolt’s proffered testimony.

Subsequently, the jury returned a verdict finding Kircher did not

negligently perform the fiscal-year-2003 audit of Chapman Lumber.

QCBT moved for a new trial, arguing the court improperly excluded

its sole expert witness, Bolt, from testifying at trial. The court denied the

motion, stating that it did not completely exclude Bolt from testifying at

trial, “but rather determined that Mr. Bolt was not qualified to give an

opinion as to the standard of care applicable to accountants performing

8

general audits.” QCBT filed a notice of appeal. 1 We transferred the case

to the court of appeals.

The court of appeals reversed the judgment of the district court

and remanded the case for a new trial. The court held QCBT properly

preserved error because the court’s ruling on the motion in limine was

definitive. As for the merits, the court held Bolt was qualified to testify

that Feltes failed to follow the work papers and perform all of the

required interviews and inventory checks.

II. Issues.

Kircher raises two issues on appeal. The first deals with error

preservation while the second deals with whether Bolt was qualified to

testify as to generally accepted CPA auditing standards, whether the

accountant breached those standards, and causation.

III. Error Preservation.

A ruling sustaining a motion in limine is generally not an

evidentiary ruling. Twyford v. Weber, 220 N.W.2d 919, 923 (Iowa 1974).

Rather, a ruling sustaining a motion in limine simply adds a procedural

step to the introduction of allegedly objectionable evidence. Id.; accord

Johnson v. Interstate Power Co., 481 N.W.2d 310, 317 (Iowa 1992)

(recognizing a ruling sustaining a motion in limine “merely adds a

procedural step to the offer of evidence [and that i]f the evidence is not

offered, there is nothing preserved to review on appeal”). Thus, a motion

in limine “serves the useful purpose of raising and pointing out before

trial certain evidentiary rulings the court may be called upon to make

during the course of the trial” and, if sustained, excludes reference or

introduction of this evidence until its admissibility is determined by the

trial court, outside the presence of a jury, in an offer of proof. Twyford,

1We note that appellate counsel did not serve as trial counsel.

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220 N.W.2d at 922–23 (recognizing further that the offer of proof allows

the aggrieved party to present a proper record for review on appeal and,

in the absence of such an offer, error may not be preserved).

The abovementioned rules regarding a motion in limine serve as

the basis for the rule that “error claimed in a court’s ruling on a motion

in limine is waived unless a timely objection is made when the evidence

is offered at trial.” State v. Alberts, 722 N.W.2d 402, 406 (Iowa 2006)

(quoting State v. Tangie, 616 N.W.2d 564, 568 (Iowa 2000)) (internal

quotation marks omitted); accord Simkins v. City of Davenport, 232

N.W.2d 561, 565 (Iowa 1975). This is because the error only occurs, if at

all, when the evidence is offered at trial and is either admitted or refused.

State v. Langley, 265 N.W.2d 718, 720 (Iowa 1978) (recognizing further,

normally “the ruling is not a final one; it is a red flag to counsel that the

evidence is not to be brought before the jury unless and until it is

separately taken up with the court . . . at trial”). There is, however, an

exception to this general rule. When the court’s ruling on a motion in

limine leaves no question that the challenged evidence will or will not be

admitted at trial, counsel need not renew its objection to the evidence at

trial to preserve error. Alberts, 722 N.W.2d at 406; State v. Miller, 229

N.W.2d 762, 768 (Iowa 1975). “In such a situation, the decision on the

motion has the effect of [an evidentiary] ruling.” Tangie, 616 N.W.2d at

569 (quoting Miller, 229 N.W.2d at 768) (internal quotation marks

omitted).

The key to deciding whether the general rule or the exception

applies in a given case is determining what the trial court purported to

do in its ruling. Alberts, 722 N.W.2d at 406. As we have recognized:

“A ruling only granting or denying protection from prejudicial

references to challenged evidence cannot preserve the

inadmissibility issue for appellate review.” However, “if the

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ruling reaches the ultimate issue [of admissibility] and

declares the evidence admissible or inadmissible, it is

ordinarily a final ruling and need not be questioned again

during trial [to preserve error].”

Id. (quoting State v. O’Connell, 275 N.W.2d 197, 202 (Iowa 1979)).

Compare State v. Daly, 623 N.W.2d 799, 800 (Iowa 2001) (holding that an

exception to the general rule applied when counsel asked the court

whether its ruling was the final order of the court and the court

responded, “yes”), with Johnson, 481 N.W.2d at 316–17 (holding the

general rule applied, and error was not preserved, when the court’s

ruling merely prohibited a party from mentioning the challenged evidence

without first obtaining permission from the court outside the presence of

the jury). Accordingly, to determine whether QCBT properly preserved

error on the issue of the admissibility of Bolt’s testimony, we first must

determine the intent of the district court ruling on Kircher’s motion in

limine.

Kircher’s motion in limine sought to prohibit Bolt from giving

testimony concerning the standards of care applicable to certified public

accountants, whether Kircher breached those standards, and causation,

as well as any perceived errors in the audit’s work papers. In ruling on

the motion, the district court concluded Bolt was not qualified to testify

as to whether Kircher performed the audit pursuant to generally

accepted auditing standards. The court then ruled, “Your motion is

granted as to Bolt.” Subsequently, QCBT inquired whether the court’s

ruling precluded Bolt from testifying about the work papers. The court

did not explicitly make a ruling on Bolt’s testimony concerning the work

papers. The court stated it was not prepared to rule on Bolt’s analysis of

the work papers at the beginning of the trial. The court also stated it

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had no problem with QCBT mentioning inconsistencies and inaccuracies

in the work papers in its opening statement.

The record clearly establishes the court’s ruling on the motion in

limine declared that Bolt’s testimony concerning generally accepted CPA

auditing standards, whether Kircher breached those standards, and

causation, was inadmissible. The court did not equivocate or state it

would reconsider its ruling at trial. Cf. Holst v. Countryside Enters., Inc.,

14 F.3d 1319, 1323 (8th Cir. 1994) (holding that a party failed to

preserve error by not pursuing a ruling at trial where the court’s motion

in limine ruling invited the party to attempt to admit the evidence during

trial). Thus, as to this testimony, we conclude the exception to the

general rule applies. See, e.g., Alberts, 722 N.W.2d at 407 (holding that

the exception to the general rule applied even though the court did not

specifically rule the evidence was inadmissible because the ruling was

definitive and reached the ultimate issue of admissibility). Accordingly,

the court’s ruling had the effect of a definitive evidentiary ruling. Thus,

there was no need for QCBT to renew its request to present Bolt’s

testimony concerning generally accepted CPA auditing standards,

whether Kircher breached those standards, and causation at trial to

preserve error on this testimony.

A question remains: what is the scope of the district court’s

definitive evidentiary ruling on Bolt’s proposed expert testimony

regarding the work papers? QCBT argues the court’s definitive ruling

broadly prohibited Bolt from giving any meaningful testimony, including

any testimony concerning the inaccuracy and inadequacy of the work

papers. Therefore, QCBT claims it properly preserved error on the

court’s ruling as to any of Bolt’s testimony. Conversely, Kircher claims

the court’s definitive ruling was limited to Bolt’s testimony concerning

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generally accepted CPA auditing standards, whether Kircher breached

those standards, and causation. Kircher asserts the court’s ruling did

not reach other issues to which Bolt may have testified, including the

work papers. Accordingly, Kircher claims QCBT failed to preserve error

on the areas of Bolt’s testimony that were outside the scope of the court’s

ruling because QCBT never renewed its request to present Bolt’s

testimony on these other issues at trial.

In its ruling on the motion in limine, the court appeared to

equivocate on the all-encompassing nature of its ruling on the

admissibility of Bolt’s testimony. After the court’s ruling, QCBT asked

the court whether its ruling precluded Bolt from testifying about the

work papers, and stated, “We might address that when Mr. Bolt’s here

outside the jury’s presence and make a decision.” The court failed to

definitively rule on the admissibility of Bolt’s testimony concerning the

work papers, or other matters, at that time.

This exchange clearly establishes the court left open the question

of whether QCBT could introduce Bolt’s testimony as to other issues,

including his analysis of the work papers, at trial. To preserve error on

these issues, apart from the ultimate issues definitively ruled on by the

court, QCBT was required to renew its request to present Bolt’s

testimony at trial and obtain a definitive ruling from the court.

At trial, the work papers were introduced into evidence without

objection. At the close of its case, QCBT called Bolt to testify in an offer

of proof. Following the offer of proof, QCBT did not renew its request to

present Bolt’s testimony or elicit a further ruling from the court as to the

admissibility of Bolt’s testimony on the work papers. When QCBT did

not offer the testimony, Kircher did not lodge an objection to the

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testimony contained in the offer of proof and the court never issued a

final ruling on the admissibility of this testimony.

Thus, the general rule regarding error preservation for a motion in

limine applies. Because QCBT did not offer the testimony contained in

the offer of proof, the court never had a chance to rule on the

admissibility of the evidence; therefore, QCBT failed to preserve error as

to the admissibility of Bolt’s testimony on the work papers and other

issues unrelated to the ultimate issue of negligence. See, e.g., Johnson,

481 N.W.2d at 317 (“If the evidence is not offered, there is nothing

preserved to review on appeal.”); State v. Delaney, 526 N.W.2d 170, 177

(Iowa Ct. App. 1994) (holding error was not preserved where the court’s

ruling was not unequivocal and “whether the evidence offered by the

State fell within the parameters of the ruling was uncertain”).

IV. The District Court’s Ruling Concerning Generally Accepted

CPA Auditing Standards, Whether Kircher Breached Those

Standards, and Causation.

QCBT properly preserved error on whether Bolt could testify as to

generally accepted CPA auditing standards, whether Kircher breached

those standards, and causation.

A. Scope of Review. We review the district court’s determination

of whether a witness may testify as an expert on a particular topic for an

abuse of discretion. Ranes v. Adams Labs., Inc., 778 N.W.2d 677, 685

(Iowa 2010). An abuse of discretion occurs when the district court

exercises its discretion on grounds or for reasons that are clearly

untenable, or to an extent clearly unreasonable. State v. Nelson, 791

N.W.2d 414, 419 (Iowa 2010); Graber v. City of Ankeny, 616 N.W.2d 633,

638 (Iowa 2000). “A ground or reason is untenable when it is not

supported by substantial evidence or when it is based on an erroneous

application of the law.” Graber, 616 N.W.2d at 638.

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B. Analysis. We hold a liberal view on the admissibility of expert

testimony in this state. Ranes, 778 N.W.2d at 685; Leaf v. Goodyear Tire

& Rubber Co., 590 N.W.2d 525, 531–32 (Iowa 1999). Iowa Rule of

Evidence 5.702 provides:

If scientific, technical, or other specialized knowledge will

assist the trier of fact to understand the evidence or to

determine a fact in issue, a witness qualified as an expert by

knowledge, skill, experience, training, or education may

testify thereto in the form of an opinion or otherwise.

Iowa R. Evid. 5.702. The party seeking to introduce the expert testimony

has the burden of demonstrating to the court, as a preliminary question

of law, that the expert is qualified and will present reliable opinion

testimony. Ranes, 778 N.W.2d at 686; see also Iowa R. Evid. 5.104(a).

Rule 5.702 presents preliminary areas a court must consider

before admitting expert testimony. Ranes, 778 N.W.2d at 685. First, the

court must consider whether the expert’s proposed testimony will “assist

the trier of fact” in understanding “the evidence or to determine a fact in

issue.” Iowa R. Evid. 5.702.

Second, the court must determine whether the witness is qualified

to testify as an expert “by knowledge, skill, experience, training, or

education” on the subject matter in question. Id. “All expert witnesses

must be qualified in the area of their testimony based on one of the five

areas of qualification.” Ranes, 778 N.W.2d at 687. However, the witness

need not have a particular degree, license, or education. Id.; Leaf, 590

N.W.2d at 535 (“[N]o particular education is required; experience is

sufficient to qualify a witness as an expert.”); Hutchison v. Am. Family

Mut. Ins. Co., 514 N.W.2d 882, 886 (Iowa 1994) (“Although licensing

carries a presumption of qualification to testify in the given field,

‘learning and experience may provide the essential elements of

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qualification.’ ” (quoting Ganrud v. Smith, 206 N.W.2d 311, 315 (Iowa

1973))).

Rule 5.702 does not impose a requirement for how an expert is to

become qualified and does not distinguish between whether an expert is

qualified or unqualified based on whether he or she belongs to a

particular profession or has a particular degree. Ranes, 778 N.W.2d at

689; see also Hutchison, 514 N.W.2d at 888 (recognizing expertise

acquired through experience is every bit as good as expertise acquired

academically). Moreover, the witness does not need to be a specialist in

the area of the testimony so long as the testimony is within the witness’s

general area of expertise. Ranes, 778 N.W.2d at 687. Finally, a court

can only determine whether an expert is qualified by considering the

expert’s qualifications in the context of the issues to be determined by

the trier of fact. Id.; see also Hutchison, 514 N.W.2d at 889 (recognizing

that those who fail to meet the standards of rule 5.702 should not be

allowed to testify even if they profess expertise on a subject).

Accordingly, we must determine whether Bolt was qualified to testify as

an expert in the areas concerning generally accepted CPA auditing

standards, whether Kircher breached those standards, and causation.

An application of these principles is illustrated in Garnac Grain Co.

v. Blackley, 932 F.2d 1563 (8th Cir. 1991). There, a grain company

sought to introduce the opinion testimony of three expert witnesses that

an accounting firm violated generally accepted auditing standards due to

its failure to discover embezzlement. Garnac Grain Co., 932 F.2d at

1565–66. The first proposed expert, the grain company’s director of

accounting, attended only one year of college, took only a few noncredit

courses in auditing and accounting, and was not a CPA. Id. at 1566.

The second proposed expert was the grain company’s current president,

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who possessed a business degree. Id. He also was not a CPA and had

never taken a course in auditing or internal controls. Id. The final

proposed expert was a retired professor who taught auditing courses for

almost forty years, but had an expired CPA license. Id. at 1567. Under

these facts, the Eighth Circuit held the first two proposed experts were

unqualified to testify. Id. at 1566. The court acknowledged that

practical knowledge and experience alone could provide an adequate

basis for expert testimony. Id. However, the court held the “deposition

testimony of these witnesses . . . indicates that their practical knowledge

does not provide them with the requisite expertise in auditing or

accounting” to opine on whether the accounting firm violated generally

accepted auditing standards. Id. As for the third proposed expert, the

court held his knowledge and experience “crosses the threshold of

admissibility.” Id. at 1567. Accordingly, the court found that any

weaknesses in the third expert’s opinion and expertise went to the weight

of his testimony, not its admissibility. Id.

From Bolt’s depositions and QCBT’s arguments, the district court

concluded Bolt “is not an expert who can determine whether or not an

audit has been performed pursuant to some generally accepted auditing

standard because he’s not a CPA.” While the district court’s reasoning

was flawed, its conclusion was correct. The fact that Bolt was not a CPA

did not disqualify him from testifying on the ultimate issue of whether

Kircher violated generally accepted accounting standards. See, e.g.,

Hutchison, 514 N.W.2d at 886 (recognizing if a person is qualified by

learning and experience, the lack of board certification or licensure goes

to the weight of the expert’s testimony, not its admissibility). Rather,

Bolt was unqualified to testify on this issue because he lacked the

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knowledge, skill, experience, training, or education to provide an

adequate basis for this testimony.

Although Bolt had experience as an IRS revenue and special agent,

Bolt did not have an accounting degree and was not a CPA. Even though

Bolt was a certified fraud examiner, Bolt had never performed a certified

audit. Moreover, while he claimed to be generally familiar with the

standards applicable to CPAs and the auditing process, he stated his

opinions with regard to Feltes’s work were not based upon whether Feltes

complied with generally accepted auditing standards. Instead, Bolt

described his proposed testimony as follows:

I looked at the work papers that [Feltes] prepared, which are

the standardized forms that I can only assume he was

required to fill out in every certified audit. I looked at those

forms and the information that he put on there, compared

them to the actual facts and what was going on at . . .

Chapman Lumber Company.

Bolt confirmed he was not planning to testify that Feltes violated

certain auditing standards because he did not specifically know each

standard that was applied in the audit. Although Bolt believed Feltes

should have conducted the audit differently, he could not testify that

such conduct was required under generally accepted auditing standards.

Bolt stated that he was not familiar with any of the standards developed

for general application by the American Institute of Certified Public

Accountants. Moreover, when asked how he would generally define the

standard of care owed by CPA accounting firms in the practice of

accounting, he stated, “Specifically, I don’t know that answer.”

At the hearing on the motion in limine, QCBT agreed that Bolt was

not qualified to testify on the ultimate issue of whether Kircher

performed the audit negligently. QCBT claimed Bolt would not testify

about the appropriate standard of care for a CPA doing an audit or

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explain that certain generally accepted accounting standards were

violated. Rather, QCBT asserted Bolt would only testify as to his

analysis of Feltes’s work papers and how they varied from the actual

facts in the case.

Just as in Garnac Grain Co., Bolt’s knowledge, skill, experience,

training, or education did not provide him with the requisite expertise in

auditing or accounting to opine on the ultimate issue of whether Kircher

breached any generally accepted auditing standards. Accordingly, we

conclude Bolt was unqualified to testify on this issue and the court did

not abuse its discretion when it failed to allow his testimony.

V. Disposition.

We vacate the decision of the court of appeals and affirm the

judgment of the district court because QCBT failed to preserve error on

the issue as to whether its expert witness could testify concerning the

accountant’s work papers and the court did not abuse its discretion in

ruling that QCBT’s expert could not testify as to generally accepted CPA

auditing standards, whether Kircher breached those standards, and

causation.

DECISION OF COURT OF APPEALS VACATED; DISTRICT

COURT JUDGMENT AFFIRMED.

All justices concur except Waterman and Mansfield, JJ., who take

no part.