The Securities and Exchange Commission said Tuesday that “a significant number” of the accounting firm’s auditors cheated on the ethics part of the CPA exam and other courses needed to maintain licenses. Perhaps most surprisingly, the SEC said that Ernst & Young “filed a request” that it had “no current issues with fraud when, in fact, the company was informed of the possibility of fraud in the CPA ethics exam.”
The $100 million fine is the largest ever against an audit firm.
“This action includes a breach of trust by gatekeepers entrusted with auditing several public companies in our country,” Gurbert Grewal, director of enforcement at the SEC, said in a press release. “It is simply disgraceful that the professionals responsible for controlling fraud by clients cheat their ethics exams on everything.”
He added that it was “equally shocking” that they hampered her investigation. “This action should send a clear message that the SEC will not tolerate integrity failures by independent auditors who choose the easiest mistake over the hardest right,” Grewal said.
In addition to the fine, the Securities and Exchange Commission ordered Ernst & Young to retain two independent advisors to “help address its deficiencies,” with one company reviewing the company’s actions regarding ethics, and another reviewing its failures to disclose.
“Nothing is more important than our integrity and our ethics,” Ernst & Young said in a statement and that it complies with the SEC order.
“Time and again, we have taken steps to strengthen our culture of compliance, ethics and integrity in the past,” a company spokesperson said. “We will continue to take extensive action, including disciplinary steps, training, monitoring, and communications that will further our commitment in the future.”
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