The US Securities and Exchange Commission (SEC) has charged Big 4 firm EY for cheating by its audit professionals on exams required to obtain and maintain Certified Public Accountant (CPA) licenses, and for withholding evidence of this misconduct from the SEC’s Enforcement Division during the Division’s investigation of the matter.
EY admits to the facts underlying the SEC’s charges and has agreed to pay a $100 million penalty and undertake extensive remedial measures to fix the firm’s ethical issues.
Gurbir S. Grewal, Director of the SEC’s Enforcement Division, said: “This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our Nation’s public companies. It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things.”
He added “It’s equally shocking that EY hindered 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 easier wrong over the harder right.”
EY admits that, over multiple years, a significant number of its audit professionals cheated on the ethics component of CPA exams and various continuing professional education courses required to maintain CPA licenses, including ones designed to ensure that accountants can properly evaluate whether clients’ financial statements comply with Generally Accepted Accounting Principles.
EY further admits that during the Enforcement Division’s investigation of potential cheating at the firm, EY made a submission conveying to the Division that EY did not have current issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam.
EY also agreed that it did not correct its submission even after it launched an internal investigation into cheating on CPA ethics and other exams and confirmed there had been cheating, and even after its senior lawyers discussed the matter with members of the firm’s senior management. And as the Order finds, EY did not cooperate in the SEC’s investigation regarding its materially misleading submission.