The Securities and Exchange Commission (SEC) hit multinational accounting firm Ernst & Young (EY) with a record-breaking $100 million penalty after the company admitted to withholding evidence from the SEC about its audit professionals cheating on the ethics component of licensure exams.
“It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things,” said SEC Enforcement Division Director Gurbir S. Grewal, according to a press release published on Tuesday.
He added, “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.”
On top of the $100 million fine, the SEC is requiring EY to overhaul its policies and procedures related to ethics, integrity, and disclosures.
For its part, EY released a statement by company spokesperson Suzanne Bouhia, reading: “We will continue to take extensive actions, including disciplinary steps, training, monitoring and communications that will further strengthen our commitment [to compliance, ethics, and integrity] in the future,” per The Washington Post.
In 2017, EY found out that 49 of its employees had shared or received answers to questions on licensure exams required of certified public accountants. Hundreds of others cheated on various courses required by state oversight boards, according to the SEC.
EY subsequently covered up what its employees had been doing and did not report any of it to the SEC, nor did the firm participate in the investigation once the SEC became aware of the company’s and its employees’ behavior.
This is the second cheating scandal to hit EY in the last 10 years. Between 2012 and 2015, more than 200 EY employees exploited a software flaw in the company’s testing platform to cheat on exams, according to the SEC.