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July 10, 2024

EY settles with CT regulators in CPA exam cheating scandal; receives probation and $164K fine

Google Ernst & Young's office in Hartford is in the Stilts Building at 20 Church St.
By Andrew Larson

Ernst & Young LLP (EY) has agreed to settle claims brought by the Connecticut Department of Consumer Protection (DCP) related to a licensure exam cheating scandal that plagued the international accounting firm a few years ago.

Under the July 2 settlement agreement with the DCP and State Board of Accountancy, which the Hartford Business Journal obtained through a Freedom of Information Act request, EY’s firm permit in the state of Connecticut is suspended for 30 days, but the suspension is stayed, and EY has been placed on probation for two years. 

In addition, EY will pay a settlement fee of $164,000 to the DCP. EY has offices in Hartford and Stamford, and holds an active Connecticut CPA firm permit.

The settlement agreement stems from a national cheating scandal unveiled by the U.S. Securities and Exchange Commission (SEC) in 2022. 

The SEC discovered that, between 2017 and 2021, a “significant number” of EY audit professionals cheated on the ethics component of CPA exams and various continuing professional education courses required to maintain CPA licenses, by using answer keys and sharing them with their colleagues.

Although some EY employees did not cheat, they knew their colleagues were cheating and failed to report the misconduct, which violated the firm’s code of conduct, according to the SEC. 

Also, EY initially failed to report the misconduct to the SEC.

EY has since taken disciplinary action against employees who engaged in misconduct. In June 2022, the firm reached a settlement with the SEC, agreeing to pay a $100 million fine.

Under the Connecticut settlement, if EY violates any terms of the probation, the State Board of Accountancy may carry out the suspension order. Upon successful completion of the probation, EY’s permit will be fully restored.

Meantime, the $164,000 settlement fee will be deposited into the DCP’s Enforcement Fund Account for use in consumer complaint resolution programs, consumer education, consumer protection enforcement and litigation, the agreement states.

EY agreed to the settlement without admitting to or denying any of the allegations.

On Wednesday morning, EY issued the following statement to the Hartford Business Journal:

“At EY, nothing is more important than our integrity and our ethics. These core values are at the forefront of everything we do. We have repeatedly and consistently taken steps to reinforce our culture of compliance, ethics, and integrity in the past, and will continue to take extensive actions that will further strengthen our commitment in the future.” 

The DCP determined that EY’s conduct, outlined in the SEC order, would subject it to local sanctions by the State Board of Accountancy.

The board took into consideration several mitigating factors, including that EY presented evidence that it is now in compliance with the SEC order; it has conducted an internal investigation and taken remedial actions to improve its culture of ethics, integrity and compliance; and it has developed surveillance and other tools to detect misconduct and to ensure any misconduct is investigated and addressed.

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