US authorities fined Ernst & Young a record $100 million for fraud in accounting ethics audits that the company initially hushed up from regulators, officials said Tuesday.
From 2017 through 2021, 49 auditors from the “Big Four” firm sent or received Certified Public Accountant (CPA) ethics check answer keys, pursuant to a Securities and Exchange Commission order.
Hundreds of other Ernst & Young professionals have cheated on other audits, while a “significant” number of employees did not cheat themselves but did not report the wrongdoing, according to the SEC’s order, which is part of the agency’s settlement agreement with of the company is.
“It’s just outrageous that the very professionals responsible for detecting fraud by customers cheated on ethics reviews of all things,” said Gurbir Grewal, chief of the SEC’s enforcement division.
Ernst & Young also took the job to task because of a lack of openness towards the agency.
On June 19, two days after the SEC fined KPMG $50 million for similar ethical misconduct, the agency sent a formal request to Ernst & Young asking whether the company received ethics or whistleblowing complaints have.
Ernst & Young’s response to the SEC implied that the firm had no current issues, although on June 19 it received a report from an employee describing how a colleague sent the CPA ethics review answers via E email had sent.
The company conducted an internal investigation into the incident, which was expanded in October 2019. Ernst & Young only disclosed the problem in March 2020, the order said.
“The SEC will not permit the transmission of misleading information or actions that delay or thwart our mandate to protect investors and our markets,” said Melissa Hodgman, deputy director of the SEC’s Enforcement Division.
Aside from the fine, Ernst & Young is required to engage two independent consultants to review its ethics policies and disclosure errors.
“We have a history of taking repeated and consistent steps to strengthen our culture of compliance, ethics and integrity,” Ernst & Young said in a media statement.
“We will continue to take extensive actions, including disciplinary action, training, monitoring and communication, which will further strengthen our commitment going forward.”
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