Ernst & Young, one of the world’s largest audit firms, has agreed to pay a $ 100 million fine after U.S. securities regulators found that some of its auditors had cheated on ethics exams and that the company did not do enough to stop the practice.
The sanction is the largest ever imposed by the Securities and Exchange Commission against an audit firm. An administrative civil order filed by regulators said Ernst, also known as EY, had deceived investigators, withheld evidence and violated public accounting rules designed to maintain the integrity of the profession.
“It is simply outrageous that the very professionals responsible for setting customers’ traps have cheated the ethical examinations of all things, ”Gurbir S. Grewal, the commission’s director of enforcement, said in announcing the deal on Tuesday. .
The sanction is double the amount KPMG, another large audit firm, paid in 2019 to resolve an investigation into similar allegations of deception by auditors in internal training examinations.
Ernst, who admitted in the order that his conduct was wrong, said in a statement that “nothing is more important than our integrity and our ethics.” The firm also said that “sharing answers about any assessment or examination is a violation of our Code of Conduct and is not tolerated” and said efforts would be needed to enforce ethical standards.
According to the commission, the ethics exams that Ernst’s auditors cheated on were part of a continuing education program offered by most states for accountants to maintain their professional licenses. The SEC said the deception involved hundreds of the company’s auditors between 2017 and 2021.
Forty-nine Ernst auditors received the “key answer” for an ethics exam that is part of the initial process to become a certified public accountant, according to the SEC’s administrative order.
Regulators said it was not the first time there had been widespread cheating in ethics reviews by Ernst employees. The SEC said a somewhat similar scam scandal, which the company managed internally, took place from 2012 to 2015.
The SEC, in order, noted that Ernst had sent warnings in the past to employees about not cheating on exams, but did not establish sufficient controls until recently.
As part of the agreement, the SEC has required Ernst to hire two independent consultants. One will review the company’s policies on ethical procedures, and the other will review its failure to properly reveal the deception.
Mr. Grewal said the agreement “should serve as a clear message that the SEC will not tolerate integrity failures by independent auditors.”