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Hundreds of auditors of accounting giant Ernst & Young cheated on the ethical evidence they had to do to obtain or maintain their professional licenses, and the company withheld evidence of misconduct from federal authorities investigating the matter, according to the Stock Exchange and Securities Commission.
In response, the SEC is imposing a $ 100 million fine on the company, the largest ever made to an audit firm, the agency announced Tuesday.
“This action involves breaches of trust by the guardians within the gatekeeper in charge of auditing many of our country’s public companies,” SEC Executive Director Gurbir Grewal said in a statement. “It’s just outrageous that the very professionals responsible for engaging customers are cheating in the ethics exams of all things.”
In a statement, Ernst & Young admitted to the SEC charges and said it is complying with the agency’s sanction.
“In the past we have taken steps repeatedly and consistently to strengthen our culture of compliance, ethics and integrity,” company spokeswoman Suzanne Bouhia said in an email. “We will continue to take comprehensive measures, including disciplinary action, training, monitoring and communications that will further strengthen our commitment in the future.”
The agency found that as of 2017, 49 Ernst & Young professionals shared or received answers to the ethics exams they had to pass to obtain the license as certified public accountants. Hundreds more cheated on courses they had to take to maintain their position before state oversight boards, while others who did not participate themselves helped ease the behavior, the SEC said.
The company’s leaders then covered the activity, without informing the SEC after the agency asked Ernst & Young about the complaints it had received and the company began an internal investigation that confirmed the bad conduct, according to the SEC. The record fine, double the $ 50 million rival KPMG paid to the agency in 2019 for its own cheating scandal, partly reflects the seriousness of the company’s decision not to cooperate with the investigation, he said. tell an SEC official to reporters.
Grewal, in his statement, said it is “equally shocking that Ernst & Young is obstructing 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 easiest wrong over the hardest “.
Beyond the fine, the SEC is forcing Ernst & Young to hire two independent consultants, one to review the company’s ethics and integrity policies and the other to investigate the lack of disclosure of its own findings.
The episode isn’t the first time Ernst & Young’s auditors have been caught cheating. Between 2012 and 2015, an internal investigation of the company found that more than 200 employees of the company exploited a software error on the company’s testing platform to cheat exams, the SEC said.
At the time, the company took disciplinary action against these employees and warned its staff not to take these shortcuts. “Our response to this unacceptable past behavior has been comprehensive, extensive and effective,” Bouhia said.
He said the new requirements the SEC is imposing on the company “will reinforce the steps we have already taken in the years since these situations occurred.”
Ernst & Young is the third largest accounting firm in the world and recorded global revenues of $ 40 billion in its most recent fiscal year, which ended in June 2021.