The SEC has leveled a record $100 million penalty against EY, finding that the Big 4 firm knew some of its auditors were cheating on exams for several years, did nothing to stop it and attempted to withhold evidence from investigators when it was discovered.
EY has admitted 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 their CPA licenses. The firm further admitted that it lied to SEC investigators regrading knowledge of the potential cheating and did not cooperate in the subsequent investigation regarding that misleading submission.
In addition to the $100 million penalty, the SEC order requires EY to engage in extensive undertakings, including retaining two separate independent consultants to help remediate its deficiencies – one to review the firm’s policies and procedures relating to ethics and integrity and another to review the firm’s conduct regarding its disclosure failures, including whether any employees contributed to the firm’s failure to correct its misleading submission.
“This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our nation’s public companies,” says Gurbir Grewal, director of the SEC’s enforcement division. “It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things. And it’s equally shocking that Ernst & Young 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.”