Source: The Economic Times
This week, accounting firm Ernst & Young was hit with record fine of $100 million from the Government of United States following a revelation by regulators. The discovery was that despite being aware that some of their auditors were cheating CPA exams for a number of years, the company did not take any action to control it.
On Tuesday, June 28, the Securities and Exchange Commission that a ‘significant number’ of the auditors of Ernst & Young cheated on an exam. Specifically, on the ethic part of the Certified Public Accountant test, along with other courses required for the maintenance the license.
In fact more surprising, the regulators stated that EY ‘made a submission’ that it did not presently have problems with cheating. While, in fact, the SEC had been actually notified of potential cheating on such an exam. Clearly, a fine $100 million is the largest one ever levied against an auditing firm. Moreover, this fine is twice the one KPMG was ordered to pay three years ago for an identical accusation of cheating.
The director of Enforcement Division of the Securities and Exchange Commission, Gurbir Grewal gave a statement in a press release. He noted how this ‘action involves breaches of trust by gatekeepers’ within the one who was assigned to responsibly audit many of the public companies of the country.
“It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things.”
Moreover, he further mentioned how it is similarly ‘shocking’ that they interrupted the investigation. He added how this step must work a clear message that the SEC would not be tolerant of any integrity compromises ‘independent auditors’ who would opt for the ‘easier wrong over the harder right.’
Accompanying the fine, an order from the SEC to EY was for to retain a couple of independent consultants. Mainly, to aid in the remedy of the deficiencies with a firm reviewing the firm’s procedures on ethics, with another on its disclosures inabilities. Moreover, the EY specified in a statement that ‘nothing’ is more crucial to them than their ‘integrity and ethics,’ and that is complying with the order.
A spokesperson from EY stated how they ‘repeatedly and consistently’ had adopted means to strengthen their values ‘compliance, ethics and integrity’ before. They added how the company would go on to take elaborate steps such as disciplinary actions, training and tracking, along with communications that would further reinforce their ‘commitment in the future.’