EY has reached $100m (£82m) settlement with the US Securities and Exchanges Commission (SEC) over claims the Big Four firm’s auditors cheated on accounting exams and later misled the watchdog’s investigators.
The US financial watchdog said in a statement that EY had agreed to pay the highest penalty ever imposed on an audit firm by the SEC, over its role in a widespread, years’ long cheating scandal.
The settlement comes after EY admitted that a “significant” number of its auditors cheated on the ethics components of the Certified Public Accountant (CPA) exams, by sharing answers between themselves.
In a submission to investigators, the firm later told SEC investigators that it did not have issues with cheating – even after senior lawyers had discussed the matter of current cheating with EY’s senior management.
Gurbir Grewal, the director of the SEC’s enforcement decision, 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.”
In addition to paying the $100m settlement, the SEC also said EY must undertake “extensive remedial measures” to fix its “ethical issues.”
The measures will see EY forced to take in two independent consultants who will review the firms’ ethics policies.
A spokesperson for EY said the firm has “repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past,” as he said the auditor will continue to take “extensive actions” in the future.
“Sharing answers on any assessment or exam is a violation of our Code of Conduct and is not tolerated at EY,” the EY spokesperson said. “Our response to this unacceptable past behavior has been thorough, extensive, and effective.”
The SEC fine comes after Canadian and US regulators in February fined Big Four accountancy firm PwC a combined sum of more than £670,000 over its role in a similar cheating scandal. Last year, KPMG also paid $50m to the SEC over a similar cheating scandal.