August 15, 2022

Ernst & Young fined $100 million after employees cheated on CPA exams

Ernst & Young fined $100 million after employees cheated on CPA exams

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New York
CNN Business

Ernst & Young was hit with a record $100 million fine from the US government after regulators discovered the company had known that some of its auditors had been cheating on exams for several years and did nothing to stop it.

The Securities and Exchange Commission said Tuesday that “a significant number” of the accounting firm’s auditors cheated on the ethics part of the CPA exam and other courses needed to maintain licenses. Perhaps most surprisingly, the SEC said that Ernst & Young had “filed a request” that it had “no current issues with fraud when, in fact, the company was informed of potential fraud on the CPA ethics exam.”

The $100 million fine is the largest ever against an audit firm.

“This action includes a breach of trust by gatekeepers within the gatekeeper tasked with scrutinizing many of our nation’s public companies,” Gurbert Grewal, director of the SEC’s enforcement division, said in a press release. “It is simply disgraceful that the professionals responsible for detecting fraud by customers cheat ethics tests on everything.”

He added that it was “equally shocking” that they had obstructed its investigation. “This action should send a clear message that the SEC will not tolerate failures of integrity by independent auditors who choose the easiest mistake over the hardest right,” Grewal said.

In addition to the fine, the Securities and Exchange Commission ordered Ernst & Young to retain two independent advisors to “help address its deficiencies,” with one company reviewing the company’s actions regarding ethics, and another reviewing its failures to disclose.

“Nothing is more important than our integrity and our ethics,” Ernst & Young said in a statement and that it complies with the SEC order.

“We have frequently and consistently taken steps to enhance our culture of compliance, ethics and integrity in the past,” a company spokesperson said. “We will continue to take extensive action, including disciplinary steps, training, monitoring, and communications that will further our commitment in the future.”

The fine is twice the fine KPMG ordered to pay in 2019 for similar allegations of fraud.