Ernst & Young, one of the world’s largest accounting firms, agreed to pay a record $100 million to US regulators on Tuesday amid accusations that dozens of its auditing staff cheated on an ethics exam and misled investigators.
The Securities and Exchange Commission (SEC) has accused that “over several years” EY audit professionals cheated on tests required to obtain and maintain CPA licenses, and withheld evidence of such misconduct from the SEC’s enforcement department while it investigated his case. .
“This action includes a breach of trust by the gatekeepers within the gatekeeper tasked with scrutinizing many of our nation’s public companies,” said Gurbert Grewal, director of law enforcement at the US Securities and Exchange Commission.
“It is simply outrageous that the professionals responsible for controlling fraud by clients cheat on ethics exams on everything. It is also shocking that Ernst & Young obstructed our investigation into this bad behaviour.
The investigation is ongoing, and officials from the Supreme Electricity Council have said they may press charges against individuals.
According to a SEC investigation between 2017 and 2019, 49 EY audit professionals cheated on tests using answer keys and shared them with colleagues. In addition, “hundreds of other audit professionals” have been cheated on courses, including those dealing with ethical obligations.
According to the Securities and Exchange Commission, “a significant number of EY professionals who did not cheat themselves, but knew that their colleagues were cheating and facilitating fraud, violated the company’s code of conduct by not reporting this misconduct.”
According to the SEC, EY was aware of a similar wave of ethics exam cheating among employees between 2012 and 2015. These issues were dealt with internally but the Securities and Exchange Commission said EY failed to put in place adequate controls to prevent a recurrence of the problem.
In a statement, EY said, “Nothing is more important than our integrity and our ethics.” The company said it complied with the SEC’s order and has taken steps to address compliance issues.
“We are confident that the results of the pledges will reinforce the steps we have already taken in the years since these situations occurred,” EY said.
“Sharing answers to any assessment or test is a violation of our Code of Conduct and is not condoned at EY. Our response to this unacceptable past behavior has been comprehensive, broad and effective.”
The fine is the highest fine that the Securities and Exchange Commission imposes on an auditor and is twice greater than $50 million competitor KPMG It paid to settle charges that employees had altered audits, used data stolen from regulators and cheated on internal exams.
In addition to the standard penalty, the Securities and Exchange Commission has ordered EY to appoint two separate advisors to examine its ethical policies and another to review cases of disclosure failures.
Grewal said the settlement “should serve as a clear message that the SEC will not tolerate integrity failures by independent auditors.”
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