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Ernst & Young Spirals, Fined Record $100 Million Amid Cheating Scandal

Ernst & Young Spirals, Fined Record $100 Million Amid Cheating Scandal

Top U.S. accounting firm, Ernst & Young, has been fined $100 million after it was discovered that employees cheated on their CPA exams.

Per NPR, the firm admitted to federal regulators that its employees had "cheated to pass key exams" for years. Furthermore, Ernst & Young had numerous internal reports regarding the CPA exam cheating scandal, but never disclosed the situation to the Securities and Exchange Commission (SEC) previously. 

NPR went on to note:

For years, the firm's auditors had cheated to pass key exams that are needed for certified public accountant licenses, the Securities and Exchange Commission found. Ernst & Young also had internal reports about the cheating but didn't disclose the wrongdoing to regulators during the investigation.

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

This is the single largest fine the SEC has ever imposed on an audit firm, making it a historic incident. In 2019, KPMG -- who is now involved in the accounting industry's first foray into the metaverse -- was fined approximately $50 million for a similar ethical breach.

CNN Business reported additional details of the situation, which has rocked the accounting world:

In addition to the fine, the SEC ordered Ernst & Young to retain two independent consultants to "help remediate its deficiencies," with one firm reviewing the company's procedures on ethics and another on its disclosure failures.

Ernst & Young said in a statement that "nothing is more important than our integrity and our ethics" and that it is complying with the SEC's order.

"We have repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past," an spokesperson for the firm said. "We will continue to take extensive actions, including disciplinary steps, training, monitoring, and communications that will further strengthen our commitment in the future."

Although the cheating allegations at Ernst & Young may not directly impact your day-to-day life, it does bring to light the importance of choosing a local CPA you can trust, whether you own a small business or simply need assistance with your personal income tax preparation.

The TaxBuzz directory puts nearly 50,000 trustworthy tax experts around the United States at your fingertips, so you can find the right accounting pro for you, no matter where you live. 

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Rebekah Barton

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