US fines Ernst Young $100 mn for cheating on accounting exam

The US authorities fined Ernst Young $100 million for cheating on accounting ethics exams that the firm initially covered up from regulators, officials said Tuesday.

49 audit professionals with the Big Four firm sent or received answer keys to the Certified Public Accountant CPA ethics exams from 2017 to 2021, according to a Securities and Exchange Commission order.

Hundreds of other Ernst Young professionals cheated on other exams, while a significant number of staff did not cheat themselves but failed to report misconduct, said the SEC order, part of the agency's settlement agreement with the firm.

The very professionals responsible for catching cheating by clients cheated on ethics exams of all things are outrageous, said Gurbir Grewal, head of the SEC's division of enforcement.

Ernst Young was accused of its lack of candor with the agency in the order.

On June 19, two days after the SEC fined KPMG $50 million for similar ethical misconduct, the agency sent Ernst Young a formal request asking if the firm had received any ethics or whistleblowing complaints.

Ernst Young's response to the SEC implied that the firm didn't have any current issues, even though it had received a report from an employee on June 19 describing how a colleague had emailed the answers to the CPA ethics exam.

The investigation was expanded in October of 2019 and the firm conducted an internal investigation of the incident. Ernst Young didn't reveal the problem until March 2020, according to the order.

Melissa Hodgman, associate director of the SEC's enforcement division, said that the SEC will not allow the submission of misleading information or any action that delays or frustrates our mandate to protect investors and our markets.

Ernst Young must retain two independent consultants to review its ethics policies and disclosure failures, besides the fine.

In the past, Ernst Young made a statement that they have taken steps to strengthen our culture of compliance, ethics, and integrity.

We will continue to take extensive actions, including disciplinary steps, training, monitoring, and communications, that will strengthen our commitment in the future.