EY agrees record settlement over ethics exam cheating EY has agreed to pay a record $100m fine, and will admit that some of its auditors cheated on the ethics portion of the CPA exam, also acknowledging that it misled U.S. regulators probing the misconduct. It is the highest penalty ever imposed by the US Securities and Exchange Commission (SEC) on an auditor, and is twice that paid by KPMG for exam cheating and illegal tip-offs. EY received a tip from an internal whistleblower in June 2019 that employees were cheating on ethics exams, which state accounting boards require as part of both initial and continuing license requirements, according to the SEC. In the same month, the SEC asked EY about any reports the firm had received about testing misconduct. EY disclosed some past instances of cheating, but didn’t reveal the latest whistleblower report focused on ethics tests. The firm’s response to the SEC was misleading because it implied EY “did not have any current issues with cheating,” the SEC wrote in the settlement order. Instead of quickly disclosing the tip to the SEC, EY started its own investigation, hoping to learn more about the claim and to come up with a plan to address any problems, according to the settlement order. EY’s top lawyers and executives knew within months that “the cheating involved more than a small number of individuals in a single office,” the order said. As part of its settlement, in addition to the $100m fine, EY must pay for two separate compliance reviews conducted by outside firms; one into internal policies designed to promote ethics and integrity, and another assessing how EY’s lawyers and managers responded to the SEC in June 2019 when the agency asked about reports of cheating. Bloomberg Financial Times Wall Street Journal