The U.S. Securities and Exchange Commission (SEC) recently outlined charges against Ernst & Young LLP, alleging the audit firms’ professionals cheated on exams required to obtain and maintain Certified Public Accountant (CPA) licenses.
The SEC also alleges Ernst & Young withheld evidence from the SEC’s Enforcement Division during the Division’s investigation of the matter.
Ernst & Young admitted to the facts underlying the SEC’s charges and agreed to pay a $100 million penalty and undertake extensive remedial measures to fix the ethical issues.
“This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our Nation’s public companies,” SEC Enforcement Division Director Gurbir S. Grewal said. “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.”
According to the SEC, Ernst & Young admitted that over multiple years a significant number of the company’s audit professionals cheated on the ethics component of CPA exams and various continuing professional education courses required to maintain CPA licenses, including ones ensuring accountants can properly evaluate whether clients’ financial statements comply with Generally Accepted Accounting Principles.
“The SEC will not permit the submission of misleading information or any action that delays or frustrates our mandate to protect investors and our markets,” SEC Enforcement Division Associate Director Melissa R. Hodgman said. “Ernst & Young faces significant sanctions and extensive remediation to ensure that its culture and conduct meet the ethical standards required of those responsible for the integrity of our capital markets.”