The Securities and Exchange Commission said Tuesday that a “significant number” of accountants from the accounting firm cheated on the ethics portion of the Certified Public Accountant test and other courses required to maintain the licenses. Perhaps more astonishingly, the SEC said Ernst & Young had “made a statement” that it had no “current issues of cheating, when in fact the company had been made aware of possible cheating during a CPA ethics exam.”
The $100 million fine is the largest ever against an accounting firm.
“This action includes breaches of trust by gatekeepers within the gatekeeper charged with controlling many of our country’s public companies,” Gurbir Grewal, director of the SEC’s enforcement division, said in a press release. “It’s just outrageous that the professionals responsible for catching customer cheating cheat on ethical exams of all things.”
He added that it is “equally shocking” that they have obstructed the investigation. “This action should serve as a clear message that the SEC will not tolerate integrity errors by independent auditors who prefer the easier evil over the harder right,” Grewal said.
In addition to the fine, the SEC ordered Ernst & Young to hire two independent advisors to “help correct the deficiencies,” with one company reviewing the company’s ethics procedures and another for errors in its disclosure. .
Ernst & Young said in a statement that “nothing is more important than our integrity and our ethics” and that it complies with the SEC’s order.
“We have taken repeated and consistent steps in the past to strengthen our culture of compliance, ethics and integrity,” said a company spokesperson. “We will continue to take extensive actions, including disciplinary action, training, monitoring and communications that will further strengthen our commitment going forward.”