SEC fines EY $100m for cheating on CPA ethics exam
To settle both charges, EY agreed to pay a $100 million penalty and undertake extensive remedial measures to fix the firm’s ethical issues.
The Securities and Exchange Commission has charged Ernst & Young LLP (EY) for cheating by its audit professionals on exams required to obtain and maintain Certified Public Accountant (CPA) licenses.
EY also withheld evidence of this misconduct from the SEC’s Enforcement Division during the Division’s investigation of the matter, the SEC added.
To settle both charges, EY agreed to pay a $100 million penalty and undertake extensive remedial measures to fix the firm’s ethical issues.
“SEC will not tolerate integrity failures by independent auditors”
Gurbir S. Grewal, Director of the SEC’s Enforcement Division, 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. And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct. 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.”
Melissa R. Hodgman, Associate Director of the SEC’s Enforcement Division, commented: “The SEC will not permit the submission of misleading information or any action that delays or frustrates our mandate to protect investors and our markets. Ernst & Young faces significant sanctions and extensive remediation to ensure that its culture and conduct meet the ethical standards required of those responsible for the integrity of our capital markets.”
EY admits that, over multiple years,
A significant number of EY audit professionals cheated on the ethics component of CPA exams and various continuing professional education courses required to maintain CPA licenses, according to EY’s own admission.
The abovementioned courses include the ones designed to ensure that accountants can properly evaluate whether clients’ financial statements comply with Generally Accepted Accounting Principles.
ẼY first denied having issues with cheating, but it is now known that the firm had been informed of potential cheating on a CPA ethics exam and even launched an internal investigation into cheating on CPA ethics and other exams, only to confirm there had been cheating. EY did not cooperate in the SEC’s investigation regarding its materially misleading submission.
The audit giant will not only pay a $100 million penalty, but will also retain two separate independent consultants to help remediate its deficiencies in policies and procedures relating to ethics and integrity as well as its conduct regarding disclosing failures.
