Ernst & Young agreed to pay $100 million to the Securities and Exchange Commission and admit that some of its auditors cheated on the ethics portion of the exam required to become a certified public accountant.
It’s the largest fine an auditing firm has ever paid to the SEC, according to a settlement order released on Tuesday.
The SEC investigation, which began in 2019, found that from 2017 to 2021 at least 49 EY auditors sent and/or received answers keys to CPA ethics exams. Additionally, “hundreds” of other auditors cheated on continuing professional education (CPE) courses that are required to maintain CPA status. “And a significant number of EY professionals who did not cheat themselves, but knew their colleagues were cheating and facilitating cheating, violated the firm’s Code of Conduct by failing to report this misconduct,” the SEC said in findings published Tuesday. Separately, it told The Wall Street Journal that “nothing [at the firm] is more important than our integrity and our ethics,” adding that its “response to this unacceptable past behavior has been thorough, extensive, and effective.”
This is not the first cheating scandal for the Big Four accounting firm.
From 2012 to 2015 some 200 EY auditors “exploited a software flaw in EY’s CPE testing platform to pass exams while answering only a low percentage of questions correctly,” according to the SEC. “The firm took disciplinary actions and repeatedly warned its audit professionals not to cheat on exams.” In addition to the $100 million fine, EY agreed to hire two separate independent consultants. One will review the firm’s ethics and integrity policies while the other will investigate “whether any EY employees contributed to the firm’s failure to correct its misleading submission.”
EY also misled or withheld information from the SEC during its latest investigation on auditors cheating on CPA exams, the order states. The investigation was launched after the SEC received an internal whistleblower tip.
