Ernst & Young (EY)) is to pay a fine of $100m to the US Securities and Exchange Commission for cheating by its audit professionals on exams required to obtain and maintain CPA licences, and for withholding evidence of this from the SEC’s Enforcement Division during its investigation.

It’s the largest penalty ever imposed on an audit firm by the SEC.

The accountancy firm admitted to the facts of the charges, agreed to pay the $100m (€94.5m), and guaranteed to take extensive remedial measures to fix the firm’s “ethical issues”.

EY has admitted that over many years a significant number of EY audit professionals cheated on the ethics component of Certified Public Accountant exams and various continuing professional education courses required to maintain CPA licences, including ones designed to ensure that accountants can properly evaluate whether clients’ financial statements comply with Generally Accepted Accounting Principles.

SEC enforcement division director Gurbir Grewal said: “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.

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“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct. This action should serve as a clear message that the SEC will not tolerate integrity failures by independent auditors who choose the easier wrong over the harder right.”

EY has also admitted that during the investigation of potential cheating at the firm, EY made a submission conveying that it did not have current issues with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics exam.

EY also admitted that it did not correct its submission even after it launched an internal investigation into cheating on CPA ethics and other exams and confirmed there had been cheating, and even after its senior lawyers discussed the matter with members of the firm’s senior management.

And, as the SEC Order finds, EY did not cooperate in the SEC’s investigation regarding its materially misleading submission.

Associate enforcement director Melissa Hodgman added: “The SEC will not permit the submission of misleading information or any action that delays or frustrates our mandate to protect investors and our markets.

“Ernst & Young faces significant sanctions and extensive remediation to ensure that its culture and conduct meet the ethical standards required of those responsible for the integrity of our capital markets.”

The SEC order finds that EY violated a Public Company Accounting Oversight Board rule requiring the firm to maintain integrity in the performance of a professional service, committed acts discreditable to the accounting profession, and failed to maintain an appropriate system of quality control.

“EY has admitted the facts underlying these findings and acknowledged that its conduct violated the integrity standard and provides a basis for the SEC to impose remedies against the firm,” said the SEC.

In addition to the $100m penalty, the order requires EY to engage in extensive undertakings, including retaining two separate independent consultants to help remedy its deficiencies.

One consultant will review the firm’s policies and procedures relating to ethics and integrity. The other will review EY’s conduct regarding its disclosure failures, including whether any EY employees contributed to the firm’s failure to correct its misleading submission.