Corruption News

Ernst & Young to Pay $100 Million Penalty for Employee CPA Ethics Exam Cheating and Misleading Investigation

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Technical Staff
June 30, 2022

On June 28, 2022, the Securities and Exchange Commission charged Ernst & Young LLP (EY) with cheating by its audit professionals on exams required to obtain and maintain Certified Public Accountant (CPA) licenses, as well as withholding evidence of this misconduct from the SEC’s Enforcement Division during the Division’s investigation of the matter. EY concedes the facts behind the SEC’s accusations and agrees to pay a $100 million penalty as well as comprehensive remedial actions to address the firm’s ethical shortcomings.

“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,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division. “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.” 1

WSJ reported that “SEC officials said EY has a history of regulatory violations and cheating on training exams by audit employees. From 2012 to 2015, more than 200 EY employees rigged their scores on continuing-education exams by exploiting a flaw in testing software, according to the settlement order.” 2 It also said , ” After other documented episodes of cheating in 2016 and 2017, EY warned U.S. employees that such misconduct could result in termination, according to the SEC. EY’s managing partner sent a similar message in June 2019. Since then, 91 audit professionals “requested, used or shared answer keys with colleagues,” the SEC’s order said.” 3

In a financial statement audit, the independent auditor (CPA) lends credibility to the financial statements. When a CPA cheats on a CPA ethics exam, he loses his credibility, professionalism, and stakeholders’ trust. As the SEC said, EY has a history of cheating on the CPA ethics exam. What kind of culture does such a company have? What should the SEC do to assure the public that such cheating will not happen again? 

Now, it is plausible to understand the quality of the audits of Wirecard, NMC (https://lnkd.in/edCuJBMp), and EY whistleblower Amjad Rihan?

NOTES

1 Read more on https://www.sec.gov/news/press-release/2022-114

2 https://www.wsj.com/articles/ey-paying-100-million-to-settle-probe-of-auditors-cheating-on-ethics-exams-11656410401?page=1

3 Ibid

Photo by Mikhail Nilov: https://www.pexels.com/photo/a-student-passing-notes-under-the-table-to-another-person-7777662/


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