Rs 800 Crore Imposed On Ernst & Young Because Their Employees Cheated On ‘Ethics’ Exam; And They Knew This..

Rs 800 Crore Imposed On Ernst & Young Because Their Employees Cheated On 'Ethics' Exam; And They Knew This..
Rs 800 Crore Imposed On Ernst & Young Because Their Employees Cheated On ‘Ethics’ Exam; And They Knew This..

Worlds one of the top accounting firms, Ernst & Young is being fined $100 million by federal regulators after admitting that its employees cheated on their ethics exams.

How Did This Happen?

According to the Securities and Exchange Commission(SEC)  findings, the firm’s auditors had cheated to pass key exams for years as it was needed for certified public accountant licenses. 

Besides this, the accounting firm had internal reports regarding the cheating, but it didn’t disclose the wrongdoing to regulators during the investigation.

The director of the SEC’s Enforcement Division, Gurbir S. Grewal said, “It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things,” said in a release.

So far, this fine is the largest penalty ever imposed by the SEC on an audit firm.

Compromise On Ethics 

Basically, a certified public accountant(CPA) license is needed by auditors to evaluate the financial statements of companies and ensure that they are complying with laws.

But, the current findings indicate that a “significant number” of Ernst & Young audit professionals specifically cheated on the ethics component of the CPA exams that were required for their accounting jobs, said the SEC.

Normally, audit firms serve a critical gatekeeping role in the financial markets.

Their main job is to ensure the integrity of the financial reporting done by companies. 

So, the independence and integrity of these firms are paramount.

Ernst & Young, being one of the “big four” accounting firms, says that it holds itself to a high standard of ethics as it’s their job to hold others accountable.

 Interestingly, the firm’s entire global code of conduct is based on an “ethical” framework.

Emphasis On Ethics And Integrity

A spokesperson for Ernst & Young, Brendan Mullin, said, “At EY, nothing is more important than our integrity and our ethics. These core values are at the forefront of everything we do,” in an email to NPR.

Further adding, “Our response to this unacceptable past behavior has been thorough, extensive, and effective.”

During the federal investigation, several employees said that they knew cheating was a violation of the company’s code of conduct.

But, they did it anyway because of work commitments or the fact that they couldn’t pass training exams after multiple tries.

Cheating From A long Time

According to the SEC, the cheating went on for many years, going back to 2012.

In the event of the discovery of an earlier cheating scheme, the firm took disciplinary actions and repeatedly warned its audit professionals not to cheat on exams. 

But, the cheating didn’t stop.

Apart from the $100 million fine, the accounting firm also has to audit itself and report the findings to the SEC, including an assessment of its ethics and integrity training. 

These findings will also be reviewed by the independent consultants for which will be paid by the firm.

Interestingly, the cheating scandal comes into picture just a couple of weeks after the Financial Times reported that Ernst & Young is planning to split its auditing and consulting arms.

It’s going to be a huge shakeup in the accounting world as it is expected to award its partners up to $8 million in shares each.

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