The Run-Down: Ernst and Young (“EY”), a Big Four accounting firm, has agreed to pay a $100 million fine and admit wrongdoing in a record settlement after company’s employees were caught cheating on required ethics exams
- The Securities and Exchange Commission says this is the biggest fine to ever be imposed on an audit firm
- In 2019, an internal whistleblower informed EY that employees were cheating on state ethics exams
- In the same month, the SEC questioned EY about any reports of testing misconduct, in which EY did not reveal the whistleblower’s report
- Under the settlement agreement, EY must pay for two separate compliance reviews conducted by outside firms
Why You Should Care:
What do you do when the people in charge of upholding ethical standards are caught… acting unethically? The SEC Enforcement Director Gurbir Grewal’s statement, “It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things”, reflects many of the public’s views on this latest scandal. Ernst & Young gained its reputation as a high brow firm by providing top notch audit, tax, and risk services. They are the company you go to to ensure your business is on point.
So what happens when the compliance professionals don’t remain compliant? We know no one is perfect, and at the end of the day some people will make less than ethical decisions, but what does it say when a large portion of an organization drops the ball? The public’s perception of EY has been shaken, and rightfully so. Reputation is everything, especially in a market where there’s no lack of competition. Avoiding situations that put your reputation at risk is imperative for any organization, but especially one that prides itself on an integrity-based business model.
EY should learn something from this, considering it isn’t their first rodeo. In 2020, a string of failed audits hit EY hard, again creating a falter in the public’s trust. Even if EY is struggling to change their ways of working, this is still a learning opportunity for the rest of us. This scandal is a reminder to stay diligent in integrity efforts. It’s not just enough to have compliance measures. Every business should prioritize consistently improving and building upon their ethical values – creating an environment from the ground up, top to bottom, that emphasizes principled leadership and sustainable business practices.