Washington DC June 29 2022: Ernst & Young has been slapped with a record $100 million fine from the US government after regulators discovered that the company knew some of its 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 ethics portion of the Certified Public Accountant test and other courses needed to maintain the licenses. Perhaps more stunningly, the SEC said that Ernst & Young "made a submission" that it didn't have "current issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam."
The $100 million fine is its largest ever against an auditing firm.
"This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our nation's public companies," said Gurbir Grewal, director of the SEC's Enforcement Division, in a press release. "It's simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things."
He added that it's "equally shocking" they hindered its investigation. "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," Grewal said.
In addition to the fine, the SEC ordered Ernst & Young to retain two independent consultants to "help remediate its deficiencies," with one firm reviewing the company's procedures on ethics and another on its disclosure failures.
Ernst & Young said in a statement that "nothing is more important than our integrity and our ethics" and that it is complying with the SEC's order.
"We have repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past," an spokesperson for the firm said. "We will continue to take extensive actions, including disciplinary steps, training, monitoring, and communications that will further strengthen our commitment in the future."
The fine is double the one KPMG was ordered to pay in 2019 for similar allegations of cheating.