EY also admitted that during the SEC enforcement division's investigation of potential cheating at the firm, EY made a submission to the SEC that indicated EY "did not have current issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam," the release added.
In addition, EY admits that it did not correct its submission to the SEC "even after it launched an internal investigation into cheating on CPA ethics and other exams and confirmed there had been cheating, and even after its senior lawyers discussed the matter with members of the firm's senior management," the release added.
Furthermore, the release noted, EY did not cooperate in the SEC's investigation "regarding its materially misleading submission."
"This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our nation's public companies," stated Gurbir S. Grewal, director of the SEC's enforcement division, in the release. "It's simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things."
Mr. Grewal further said in the release: "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."
As part of EY's punishment, the audit firm will be required to retain two separate independent consultants to "help remediate its deficiencies," the release said. One consultant will review the firm's policies and procedures relating to ethics and integrity, while 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 added in the release.
In June 2019, the SEC imposed a $50 million fine against another of the big four auditing firms, KPMG LLP, over accusations that "numerous KPMG audit professionals cheated on internal training exams by improperly sharing answers and manipulating test results." According to a news release issued by the SEC on June 17, 2019, KPMG had also altered "past audit work after receiving stolen information about inspections of the firm" that would be conducted by the Public Company Accounting Oversight Board, the non-profit corporation established by Congress to oversee the audits of public companies.
Brendan Mullin, a spokesman for EY, said by email: "At EY, nothing is more important than our integrity and our ethics. These core values are at the forefront of everything we do. EY acknowledges the findings determined by the SEC and is complying with the requirements of the order."
Mr. Mullin also said that EY has "repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past. We will continue to take extensive actions, including disciplinary steps, training, monitoring, and communications that will further strengthen our commitment in the future."