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Exam cheating
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Regulator takes steps to stamp out exam cheating

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Following the recent Big Four exam cheating scandals across the globe, the accounting watchdog has called on audit firms and professional bodies to ensure similar cheating doesn’t happen in the UK.

15th Jul 2022
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Late last month EY was handed a $100m fine in the US after it emerged following an investigation by the Securities and Exchange Commission (SEC) that dozens of its audit staff had cheated in an ethics exam. 

The SEC chastised the Big Four firm across the pond for the “integrity failures” of the independent auditors “who choose the easier wrong over the harder right”. 

But this is not an isolated event. The $100m EY penalty came only months after 1,200 PwC in Canada was fined over $900,000 for 1,200 employees cheating in an exam and KPMG in Australia getting hit with a $(AUS)450,000 penalty for a similar misdemeanour. 

Now the Financial Reporting Council (FRC) has today picked up on the number of firms around the world getting sanctioned for exam cheating and is wanting tier one audit firms and professional bodies to clamp down before a similar scandal washes up on these shores. 

Integrity and objectivity

The FRC expressed in a letter to the CEOs of the audit firms that it is “deeply concerned” about the “potential impact on UK audit firms”. 

Along with being reminded of the need for the firm and its staff to behave with integrity and objectivity, the letter called on tier one audit firms to “formally set out the preventative and detective controls in place at your firm to ensure that such incidents do not happen in the UK”. 

These firms have also been asked to provide details of controls in place for the wider firm and individual, along with details of internal assessments and those invigilated by a recognised professional body. 

The FRC also sent a similar letter to professional bodies to ensure controls are in place to mitigate the risks of exam cheating potentially impacting UK audits. 

Like the audit firms, the professional bodies have been asked to provide details of the integrity of examinations and testing of students. The watchdog is seeking details in particular from the recognised qualifying bodies of assessments where students sit exams in a physical exam room and someone from their employer is invigilating if they’re sitting the exam at their workplace. 

Exam cheating scandals

EY was the most recent Big Four firm to hit headlines for exam cheating. The US arm of the firm admitted to being hit with the massive fine. EY in the US also told the SEC’s enforcement division’s investigation that it didn’t have any current issues with exam cheating, despite being made aware of said cheating. 

“This action involves breaches of trust by gatekeepers 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, at the time. 

While the EY fine was the biggest of the recent scandals, the other two were equally as damning for the two other Big Four firms. 

PwC in Canada was pulled up for a lack of quality control standards following exam cheating between at least 2016 and early 2020. The Canadian Public Accountability Board (CPAB) identified more than 1,200 professionals who were involved in “improper answer sharing” on mandatory internal training courses. 

Answers to the questions were shared through several shared devices that the employees had created on the firm’s computer network. The CPAB reported that the professionals had posted the answers for others to view and provide supplemental answers. It added that individuals even sent emails with documents attached with answers to training questions and discussing answers when taking tests in the presence of others.

Sharing answers

KPMG also got pulled up for exam cheating between 2016 and early 2020. Similarly more than 1,100 employees had shared answers as part of mandatory training courses. The employees shared answers primarily over email, but individuals also provided answers by text messages or by using an instant message service, sharing hard copy documents, saving answers to a shared server and also when taking the test. 

AccountingWEB columnist The Imprudent Accountant, an anonymous partner from an unnamed firm, preempted the FRC’s intervention when the EY exam cheating scandal first emerged. “Perhaps it is time for the regulatory bodies to get a lot more serious. This should involve not only significant fines for firms but also lengthy, possibly lifetime, bans for anyone found cheating or facilitating cheating.

“Personally, I would extend this to those running firms where such behaviour is carried out on a wide scale since ultimately, they are the people that need to sort out this mess,” they said.

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Replies (8)

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By Hugo Fair
15th Jul 2022 17:43

"the accounting watchdog has called on audit firms and professional bodies to ensure similar cheating doesn’t happen in the UK"

The same audit firms where the cheating was found to be endemic and approved at senior levels (and where the official line to the SEC was 'nothing to see here' even when they knew otherwise) ... but now they've been asked nicely, that's all sure to change immediately?

The Imprudent Accountant is right (but a voice in the wilderness) in saying what is needed: "lengthy, possibly lifetime, bans for anyone found .. facilitating cheating .. extend(ed) to those running firms where such behaviour is carried out on a wide scale"

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By Paul Crowley
15th Jul 2022 17:52

' “Personally, I would extend this to those running firms where such behaviour is carried out on a wide scale since ultimately, they are the people that need to sort out this mess,” they said. '

Has that person declared a preferred pronoun?

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By Paul Crowley
16th Jul 2022 14:51

People running the big firms really do not understand other people
Loads of staff know about cheating
Information will leak once they either move on or are pushed

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By JustAnotherUser
18th Jul 2022 08:15

Cheating on an exam about moral principles, behaviour and conduct, you cannot make this stuff up.

Unless the fines come with stricter penalties for those in charge and real consequence, these cost of business fines will continue.

Name and shame those accountable for these things, oust them from the industry, personal fines and disciplinaries .

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By CJaneH
18th Jul 2022 15:02

It rather sums up my view you cannot teach or train people to act ethically. You can only select people who act ethically and dismiss those that do not.

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By Ben Alligin
19th Jul 2022 09:47

Cheating in an audit ethics exam is surely worth a distinction? Those are exactly the candidates who need to be fast tracked for partnership judging by the recent audit failures by the big 4.

I am now very confused. So you can't cheat in an audit ethics exam, but you can falsify actual audit reports resulting in huge financial losses to the general public?!

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By Mr J Andrews
19th Jul 2022 10:18

Cheating in the UK amongst the Big 4 ? Surely this could never happen ???

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By User deleted
19th Jul 2022 11:29

According to the council, suspicious behavior by the agents was detected, and as a result, disciplinary procedures are now in motion. Those accused now face losing their licences to sell insurance. Although the allegations have yet to be proven, the regulator has saw fit to suspend the licences of the agents in question. “Council was concerned that because of the allegations of cheating, they took the additional step of suspending the agents’ licences until hearings have been made,” says Insurance Council of British Columbia Executive Director Gerry Matier. “Basically, it means they have a right to be heard, but they won’t be allowed to do any work until council is satisfied that it is wrong.”

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