The S.E.C. said the cheating involved hundreds of the firm’s auditors from 2017 to 2021.
Top accounting firm Ernst & Young has been fined with a record-breaking $100 million fine from the US government after regulators discovered that the company was aware that ofits auditors had been cheating on exams for many years and didn’t do anything to stop it.
An astounding 49 auditors at Ernst received the answer key to an ethics exam that is part of the initial process of becoming a certified public accountant, according to the S.E.C.’s administrative order.
Regulators said this was “not the first time” that there had been widespread cheating on ethics exams by Ernst employees.
The S.E.C. said a similar scandal occured in 2012 to 2015, which the firm handled internally.
The S.E.C. said that Ernst had sent out warnings to employee in the past regarding “not cheating on exams,” but did not put in place sufficient controls until recently.
The $100 million fine is its largest ever against an auditing firm.
In a press release, the Director of the SEC’s Enforcement Division Gurbir Grewal said, “This action involves breaches of trust by gatekeepers within the gatekeeper 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 of all things.”
“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,” Grewal said.
As part of the settlement, the SEC is requiring Ernst & Young to retain 2 independent consultants to “help remediate its deficiencies,” with one firm reviewing the company’s procedures on ethics and another on its disclosure failures.
Ernst & Young said in a statement that “nothing is more important than our integrity and our ethics” and that it is complying with the SEC’s order.
“We have repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past,” an spokesperson for the firm said. “We will continue to take extensive actions, including disciplinary steps, training, monitoring, and communications that will further strengthen our commitment in the future.”
The fine is twice the amount KPMG was ordered to pay in 2019 for similar allegations of cheating.
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