If it could happen to EY, could it happen to you?

If it happens in a company like Ernst & Young LLP (EY), do you think it could happen in your company?

EY admits a "significant number" of its audit professionals cheated over many years on the ethics part of the licensing exams required for work in their industry. This breach of trust became public two weeks ago.

The irony is spectacular, as the SEC pointed out.

“This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our Nation’s public companies. It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division.

“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct," said Mr. Grewal

Yes, that's right: EY cheated on the ethics exam and covered it up. They had internal reports about the cheating but did not stop it, did not report it, and did not respond clearly about it when the SEC investigated it.

The SEC imposed the largest penalty in its history on EY: $100 million. EY agreed to pay the $100 million penalty and agreed to "undertake extensive remedial measures to fix the firm’s ethical issues."

EY has all the resources in the world available to it. Yet, they had a "significant number" of their people cheating on the ethics exam requirements and covering it up.

The exact count of people involved was not reported, but think about it. It went on for years. The number must be hundreds. Thousands maybe?

Cheating on the ethics exam and covering it up became part of the culture for years.

Is it possible to cheat only on one thing? Or, if you're a cheater in one area, isn't it likely you're a cheater in others too? It is such a slippery slope, isn't it?

An EY spokesman said in various media releases about the cheating and penalty, "At EY, nothing is more important than our integrity and our ethics. These core values are at the forefront of everything we do."

Really? No, not really. It was widespread and went on for years.

EY has all of the trainings, Global Code of Conduct (talks about integrity), management oversight, systems, legal support. Yet, it did not live up to its own standards for years.

That failure happened at EY, with all their resources...could it happen in your company?

Reflect on it and be sure before it's too late. A gigantic fine would ruin a lot of companies. So would the damage to the reputation. If you need help ensuring your company does a better job living up to its values than EY does, give me a call.

Sources:
SEC press release
NPR article