Ernst & Young cheated on the ethics section of the Certified Public Accountant exam and withheld evidence of the behavior from regulators, according to the Securities and Exchange Commission.
The SEC has fined EY $100 million — the largest penalty ever for an accounting firm — the agency announced on Tuesday. Beyond breaking accounting rules, the company "hindered" the agency's probe of the misconduct by withholding information from the SEC, the regulator stated.
"It's simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams," Gurbir Grewal, director of the SEC's enforcement division, said in a statement. "It's equally shocking that Ernst & Young hindered our investigation of this misconduct."
After being told of the potentially untruthful conduct, EY "indicated that the firm did not have any current issues with cheating," and never informed the agency when an internal investigation found evidence of it, according to the SEC.
Nearly 50 EY audit employees shared answers on the ethics part of the CPA exam between 2017 and 2021, with hundreds more cheating on continuing professional education courses, the SEC said. A significant number of EY professionals who did not cheat but knew their colleagues did, and facilitated the cheating, also violated the firm's code of conduct by failing to report it.
EY said it was complying with the settlement order and would take additional actions to increase compliance.
"We are confident that the outcomes of the undertakings will reinforce steps we have already taken in the years since these situations occurred," EY said in a statement. 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."
The SEC in 2019 fined another of the "big four" accounting firms, KPMG,and changing previous audit work after getting stolen information from an industry watchdog group.
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