EY fined $100m after employees cheated on ethics exams
EY has been hit with a record $100m (£81.6m) fine after dozens of its employees cheated on an ethics exam.
The Big Four accountant received the penalty after it admitted that nearly 50 of its auditors cheated on the ethics portion of the Certified Public Accountant (CPA) exam. Bosses at the firm then misled US regulators about the misconduct and hindered their investigation.
The fine is the biggest ever handed down by the US Securities and Exchange Commission to an accounting firm, twice the penalty paid by KPMG in 2019 for exam cheating and illegal tip-offs.
Gurbir Grewal, director of the SEC’s enforcement division, said: “It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams.
“It’s equally shocking that Ernst & Young hindered our investigation of this misconduct… This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our nation’s public companies.”
Almost 50 EY auditors improperly shared answers to the ethics portion of the CPA exam between 2017 and 2021 and hundreds more cheated on continuing professional education courses, the SEC said.
Passing the CPA's ethics exam is a requirement to become a certified accountant in the US. It consists of 40 multiple choice questions on topics such as how to maintain integrity and objectivity and what actions could discredit an accountant or cause them to lose their licence.
Despite having been informed of possibly dishonest behaviour, the firm told the regulator it didn’t have a problem with cheating and then failed to promptly correct those statements when it later launched an internal investigation.
On top of the record fine, EY must hire two separate consultants to examine its ethics policies and another to review disclosure failures.
The SEC’s investigation is ongoing and it could still bring action against individual auditors.
The fine is the latest blow to the reputation of the Big Four accounting and consulting giants, EY, KPMG, Deloitte and PwC. In the UK, EY is being sued for at least $2.5bn for alleged negligence in its audits of NMC Health, the former FTSE 100 hospital group that collapsed in a suspected fraud.
A spokesman for EY said the firm is complying with the SEC’s requirements, adding: “We have repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past. We will continue to take extensive actions, including disciplinary steps, training, monitoring, and communications that will further strengthen our commitment in the future.
“Sharing answers on any assessment or exam is a violation of our Code of Conduct and is not tolerated at EY. Our response to this unacceptable past behavior has been thorough, extensive, and effective.”
Mr Grewal of the SEC said: “This action should serve as a clear message that the SEC will not tolerate integrity failures by independent auditors who choose the easier wrong over the harder right.”
