CPA ethics exam cheaters spur fine
Ernst & Young LLP admitted that dozens of its audit personnel cheated on the ethics portion of the Certified Public Accountant exam and that the firm misled U.S. regulators probing the misconduct, according to the Securities and Exchange Commission.
The SEC announced on Tuesday that EY would pay a $100 million fine, the largest-ever penalty for an audit firm. In addition to violating accounting rules, EY didn't cooperate with a key part of the regulator's probe, the agency said.
Almost 50 EY audit employees improperly shared answer keys to the ethics portion of the CPA exam between 2017 and 2021 and hundreds more cheated on continuing professional education courses, the SEC said.
EY said in a statement it's complying with the SEC's settlement order and will take additional steps to improve compliance.
Despite having been informed of possibly dishonest behavior, the firm conveyed to the agency it didn't have a problem with cheating, according to the SEC. The auditor then failed to promptly correct those statements when it later launched an internal investigation.
Many EY employees knew that their behavior violated the company's code of conduct, but some still did it because they couldn't pass on their own, according to the SEC. The firm ultimately disciplined and, in some cases, fired people for their actions, according to the SEC, which said its investigation is ongoing.
“It's simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams,” Gurbir Grewal, the head of the SEC's enforcement division, said in the statement. “It's equally shocking that Ernst & Young hindered our investigation of this misconduct.”
EY's record SEC penalty follows a $50 million fine against KPMG LLP in 2019 for cheating on internal training exams, as well as for altering past audit work after receiving stolen information from an industry watchdog.
KPMG also admitted wrongdoing in settling that case.
Inflation worries push stock markets down
Stocks closed broadly lower Tuesday on Wall Street after a discouraging snapshot of U.S. consumer confidence stoked investors' worries about the risk that sharply higher interest rates and pervasive inflation could trigger a recession.
The S&P 500 fell 78.56 points to 3,821.55, while the Dow dropped 491.27 points to 30,946.99. The techheavy Nasdaq slid 343.01 points to 11,181.54. The Russell 2000 gave up 32.90 points, or 1.9%, at 1,738.84. The indexes are all on pace to for losses of 6% or more in June.
Athletic footwear and apparel giant Nike fell 7% after giving investors a cautious update on the potential hit to revenue because of lockdowns in China. The company relies on China for roughly 17% of its revenue, according to FactSet.
Wynn Resorts rose 3.2% and Las Vegas Sands added 4%. The companies, which have major gambling businesses in China, got a boost after China eased a quarantine requirement for people arriving from abroad.
Technology and communications companies were among the biggest losers Tuesday. Microsoft fell 3.2% and Apple dropped 3%. Google parent Alphabet slid 3.3%.
Energy stocks made solid gains as U.S. crude oil prices rose 2%. Hess rose 5.6% for the biggest gain in the S&P 500.
The yield on the 10-year Treasury note, which helps set mortgage rates, held steady at 3.19%. Overseas markets rose.