Ernst & Young has agreed to pay $100 million to settle U.S. Securities and Exchange Commission charges that its auditors purposely cheated on certified public accounting, or CPA exams, and that it misled SEC investigators in their pursuit of the case.
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The London-based auditor, who’s part of the Big Four accounting firms, admitted to the charges and agreed to pay what the SEC claimed is its largest fine ever against an auditor.
“EY acknowledges the findings determined by the SEC,” said Brendan Mullin, EY media relations director, noting that the firm’s response has been “thorough, extensive and effective.”
“At EY, nothing is more important than our integrity and our ethics,” Mullin added.
The 14-hour long CPA is the key qualification for accountants in the United States.
The Wall Street watchdog discovered that 49 EY associates “obtained or circulated” answer keys to CPA license exams, while hundreds of others cheated to complete the continuing professional education components relating to CPA ethics.
EY will also be required to “undertake extensive remedial measures to fix the firm’s ethical issues,” the SEC stated.
“This action involves breaches of trust by gatekeepers … entrusted to audit many of our nation’s public companies. It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams,” Gurbir Grewal, the SEC’s enforcement director, said in a statement.
“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct,” added Grewal.
During the investigation EY submitted documentation to the SEC claiming that there were no known cheating issues, when, in fact, they had already been informed of potential cheating on a CPA ethics exam by a member of staff, the regulatory agency said.
EY admitted it did not correct its submission even after an internal investigation confirmed there had been cheating, the SEC announced. It also found evidence that the firm’s senior lawyers discussed the matter with senior management, and still neglected to take action to rectify their
The SEC has ordered the firm to retain two independent consultants to help remediate its inadequacies in processes. One will be responsible for reviewing the firm’s policies and procedures relating to ethics and integrity. The other will review EY’s conduct regarding its disclosure failures, including a deeper investigation into whether any EY employees contributed to the firm’s failure to correct its misleading submission, the SEC said.
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