Ernst & Young has been fined a record $ 100 million by US authorities after regulators discovered that the company knew some of their auditors were cheating on exams for several years and did nothing to stop it.
The Securities and Exchange Commission said Tuesday that a “significant number” of the accounting firm’s auditors cheated on the ethical part of the Certified Public Accountant test and other courses needed to maintain the licenses. Perhaps more astonishingly, the SEC said that Ernst & Young “filed a filing” stating that they did not have “current cheating problems when the firm had actually been informed of potential cheating on a CPA ethics exam.”
The $ 100 million fine is the largest ever against an auditing firm.
“This action involves a breach of trust by gatekeepers within the gatekeeper who are entrusted with auditing many of our nation’s public companies,” said Gurbir Grewal, director of the SEC’s Enforcement Division, in a press release. “It is simply outrageous that the professionals who are responsible for catching the cheating of clients, cheated on ethics exams of all things.”
He added that it was “equally shocking” that they obstructed the investigation. “This action should serve as a clear message that the SEC will not tolerate integrity failures from independent auditors who choose the slightly wrong over the more difficult right,” Grewal said.
In addition to the fine, the SEC ordered Ernst & Young to retain two independent consultants to “help rectify its shortcomings,” with one firm reviewing the company’s ethics procedures and another for failure to disclose.
Ernst & Young said in a statement that “nothing is more important than our integrity and our ethics”, and that it is in accordance with the SEC’s order.
“We have repeatedly and consistently taken steps to strengthen our culture of compliance, ethics and integrity in the past,” a company spokesman said. “We will continue to take comprehensive action, including disciplinary action, training, monitoring and communication that will further strengthen our commitment in the future.”
The fine is double what KPMG was sentenced to pay in 2019 for similar allegations of cheating.