Ernst & Young hit with record fine after employees cheat on ethics exam

Ernst & Young also agreed to 'undertake extensive remedial measures' to address ethics concerns

Big Four accounting firm Ernst & Young will pay $100 million to settle U.S. Securities and Exchange Commission (SEC) charges that its auditors cheated on certified public accounting (CPA) exams and that it misled the agency's investigators.

The London-based auditor admitted that a "significant number" of its audit professionals cheated on their certified public accountant exams. The CPA is the key qualification for accountants in the United States.

Ernst & Young Logo on Polland building

EY logo is seen on an office building in Krakow, Poland on January 28, 2022. ( Jakub Porzycki/NurPhoto via Getty Images / Getty Images)

"EY acknowledges the findings determined by the SEC," said Brendan Mullin, EY media relations director, adding that the firm's response has been "thorough, extensive and effective."

The Wall Street watchdog found that 49 EY professionals "obtained or circulated" answer keys to CPA license exams, while hundreds of others cheated to complete the continuing professional education components relating to CPA ethics over a four-year period stretching from 2017 to 2021.

"A significant number of EY professionals who did not cheat themselves, but knew their colleagues were cheating and facilitating cheating, violated the firm’s Code of Conduct by failing to report this misconduct." the SEC said in a filing.


Ernst & Young agreed to pay what the SEC said was its largest fine against an auditor. Aside from paying the penalty, EY agreed to "undertake extensive remedial measures" to address ethics concerns.

"This action involves breaches of trust by gatekeepers ... entrusted to audit many of our nation's public companies. It's simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams," Gurbir Grewal, the SEC's enforcement director, said in a statement.

SEC chairman Gary Gensler

Gary Gensler, Chair of the U.S. Securities and Exchange Commission, testifies before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on September 14, 2021, in Washington, DC. (Evelyn Hockstein-Pool/Getty Images / Getty Images)

EY submitted to the SEC that they did not have any issues with auditors cheating on the CPA exam when, in fact, the firm had been told by a number of staff of potential cheating going on a CPA ethics exam. Instead, EY submitted a "materially misleading" document in which it denied a widespread cheating problem, according to the SEC.


It added that EY admitted it did not correct its submission even after an internal EY investigation confirmed there had been cheating, and even after its senior lawyers discussed the matter with the firm’s senior management.

"And it's equally shocking that Ernst & Young hindered our investigation of this misconduct," added Grewal.

Ernst & Young Logo on building in L.A.

LOS ANGELES, UNITED STATES - 2020/02/01: British multinational professional services firm Ernst & Young or simply EY logo.  (Alex Tai/SOPA Images/LightRocket via Getty Images / Getty Images)

The SEC's order also finds that EY violated a Public Company Accounting Oversight Board (PCAOB) rule requiring the firm to maintain integrity in the performance of a professional service.

The SEC has ordered EY to retain two independent consultants to help remediate its deficiencies. One will review the firm’s policies and procedures relating to ethics and integrity. The other will review EY's conduct regarding its disclosure failures, including whether any EY employees contributed to the firm’s failure to correct its misleading submission, the SEC said.


Ernst & Young's $100 million fines is twice as large as KPMG's $50 million fine from SEC in 2019. KPMG was fined for federal allegations that some of its former employees cheated on their training exams.

Reuters contributed to this report.