On 28 June 2022, the U.S. Securities and Exchange Commission (SEC) charged Ernst & Young LLP (EY) for cheating by its audit professionals on exams required to obtain and maintain their Certified Public Accountant (CPA) licenses, and for withholding evidence of this misconduct from the SEC’s Enforcement Division during the Division’s investigation of the matter. EY agreed to pay a USD 100 million penalty and to undertake extensive remedial measures to fix the firm’s ethical issues. According to the SEC, this is the largest fine the SEC has imposed on an audit firm.

The investigation found that over multiple years, a significant number of EY audit professionals cheated on the ethics component of CPA exams and various continuing professional education courses required to maintain CPA licenses, including ones designed to ensure that accountants can properly evaluate whether clients’ financial statements comply with Generally Accepted Accounting Principles (US-GAAP).

In addition to paying the penalty, EY will have to engage in extensive undertakings, including retaining two separate independent consultants to help remediate its deficiencies. One consultant shall 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 according to the SEC’s press release.

Following the SEC’s announcement, the Canadian accounting regulator announced it will examine E&Y’s Canadian operations to find out whether cheating also occurred in Canada. In February 2022, the Canadian regulator reached a settlement with Canada’s PricewaterhouseCoopers LLP (PwC) after more than 1’200 PwC professionals shared answers on tests in mandatory internal training courses from 2016 to 2020.