EY has been given more time to resolve issues exposed by an exam cheating scandal that landed it a $100mn fine last year, as it wrestles with the fallout from findings that it misled US regulators.
The settlement with the Securities and Exchange Commission ordered an independent investigation into why the Big Four firm’s US leaders failed to disclose evidence from a whistleblower that employees were sharing answers on professional tests, including ethics exams.
It originally set a January deadline for the completion of the investigation and for EY to begin implementing any recommendations, such as disciplinary action against those involved.
The SEC settlement also ordered an independent consultants’ review of EY’s testing procedures, to be submitted by the end of March.
But the work has not been concluded, and the SEC has given the independent consultants more time to complete their review, according to people familiar with the matter.
The $100mn fine was the largest paid by an accounting firm over exam cheating, and significantly affected US partners’ earnings.
Hundreds of EY staff had found ways to cheat on the tests needed to keep their professional licences, the SEC found, and more stayed silent about the widespread wrongdoing.
The SEC was particularly angered by the discovery that EY had held back information from regulators. The firm told regulators in June 2019 that issues with cheating were in the past even though, one day earlier, its human resources department had received a new staff tip about misconduct.
EY did not correct its submission to the SEC, which only learned about the latest wave of cheating the following March, when the firm disclosed it to another regulator.
The independent consultants that EY was ordered to hire have been charged with reviewing the firm’s procedures to prevent more cheating in the future and examining “whether any members of EY’s executive team, general counsel’s office, compliance staff or other EY employees contributed to the firm’s failure to correct its misleading submission” to the SEC.
EY said: “We have met every deadline required of us, with the agreement of the SEC staff, and extensions are not uncommon.” The SEC declined to comment.
EY is dealing with the fallout from the cheating scandal against a backdrop of uncertainty over the future of the firm.
Its global leadership last year agreed to pursue a spin-off of its consulting and tax advisory business, but the plan has run into resistance from leaders of the US audit business. EY’s US managing partner Julie Boland last month called a halt to plans for the split.
Talks are continuing between the US leadership and the rest of the global firm about how the transaction might be reshaped.
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