Audit firm Big Four EY has reached a record $ 100 million deal with the U.S. securities regulator to resolve claims that dozens of its employees deceived in an ethics exam and that deceived investigators.
The fine is the highest the U.S. Securities and Exchange Commission has ever imposed on an auditor, double the penalty paid by KPMG in 2019 for cheating on exams and illegal notices.
“This action involves breaches of trust by the guardians within the gatekeeper in charge of auditing many of our country’s public companies,” Gurbir Grewal, director of the SEC’s enforcement division, 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.”
The investigation continues and an SEC official said the regulator could also file cases against individuals.
Between 2017 and 2021, 49 EY staff members sent or received response keys to the ethics part of the Certified Public Accountant exam, with hundreds more cheating on the tests needed to maintain certification, according to the order of the SEC. A “significant” number of employees also did not report the violations, the agency said.
EY acknowledged the SEC’s findings and said it was complying with the order. His response to “this unacceptable past behavior has been comprehensive, extensive and effective,” the auditor said, adding that he will continue to take steps, such as disciplinary action and training to “strengthen” commitments to “compliance, ethics and integrity “.
The unprecedented sanction comes when EY suspends its plans to split its auditing and advisory practices globally, a move that would release consultants from liability for future regulatory fines and legal awards for misconduct or negligence on the part of auditors. company.
The fine was announced during a week of seizures at EY. U.S. leader Kelly Grier, who left the company after a power struggle with global leader Carmine Di Sibio, is due to resign Thursday. She will be replaced by Julie Boland, who won the partner election in February.
Shortly after the KPMG case in 2019, EY formally denied any issues with its own employees cheating on exams, according to the SEC’s order. The day before, however, EY received a notice that an employee had shared answers to a CPA ethics exam, but did not change his presentation to the SEC even after initiating an internal investigation, confirming cases of deceiving and discussing the matter between senior management and lawyers.
EY said nothing to the SEC or the Public Company Accounting Oversight Board for nearly nine months, according to an SEC official, which was a factor that contributed to the regulator’s decision to ask for a penalty. record.
Under the SEC’s order, 91 EY employees requested, used, or shared responses with their colleagues after the U.S. president and managing partner sent a note to U.S. staff in 2019 warning against the trap in light of the KPMG case.
“It’s shocking that Ernst & Young has hindered our investigation of this misconduct,” Grewal said. “This action should serve as a clear message that the SEC will not tolerate integrity failures by independent auditors who choose the easiest wrong instead of the hardest.”
In addition to the fine, the SEC will install two independent consultants in EY. One will review the policy on ethics and integrity, while the other will have access to inside information that has not been made available to the SEC, as well as powers to enforce labor actions and other resources, as they probe communications communications. EY to regulators.
The order issued on Tuesday is EY’s latest regulatory execution. The SEC has filed five cases against the auditor since 2014.
It is also the latest in a series of fines imposed on Big Four companies for cheating on SEC exams or audit inspections. Earlier this year, the former head of audit of KPMG in the United States was fined $ 100,000 and censored by the country’s accounting control body for failing to supervise colleagues who received prior notice about the audits that the regulator planned to examine.