Cheating on Internal Training and Ethics Exams Is a Wake-Up Call for the Accounting Profession

By Michael K. Shaub, June 29th, 2022

The following is a a very thoughtful blog published by my friend and colleague, Mike Shaub. Mike addresses the recent scandals where three of the four Big Four CPA firms helped auditing professionals to cheat on CPA Ethics Exams, CPE Ethics Exams, and internal training courses. The absence of ethics by those professionals should be a wake-up call for the entire accounting profession to carefully examine how and why they have lost their way and what can be done about their failure to meet their gatekeeper role and serve the public interest above all else. Here is Mike’s blog.

I have been a CPA for almost 40 years, and it is hard to surprise me with any headline. But I will admit to being flabbergasted by the announcement that the Securities and Exchange Commission (SEC) was fining Big 4 accounting firm Ernst & Young (EY) $100 million because hundreds of its employees had cheated on ethics exams required to become a CPA and on other continuing education exams. This has similarities to what happened at KPMG a few years ago and at PwC Canada earlier this year. What was most interesting was the ferocity of the SEC’s response, both in the amount of the fine and in the language used to describe the actions of EY staff.

My initial response was anger. Three of the four largest firms have now been implicated in this same kind of cheating on internal exams, though EY’s cheating on ethics exams required to finalize becoming a CPA seems unique. There seems to be a long pattern, stretching back at least a decade, of EY staff exploiting software weaknesses and simply sharing answers, despite repeated documentation and warnings by management and some level of internal sanctions.

The SEC also claims that management and EY’s attorneys were misleading when the SEC inquired whether there were any current dishonesty issues a few years ago, opting for its own internal inquiry instead of facilitating the SEC’s. This seems to have driven the amount of the judgment.

I am moving past anger into sadness because I know that in some ways, I am part of two institutions that are responsible for these egregious lapses in moral integrity. The EY problem is not just a public accounting issue; many of these people were cheating on ethics exams to become CPAs. They were brand new to the profession. That means they didn’t learn to engage in this behavior from the profession; they learned it in our classrooms.

To be fair, they actually learned it in middle school and high school, and they were rewarded for it with high class rankings and admissions to the best business schools. But the business schools, and the universities themselves, are greenhouses for this kind of cheating. They emphasize group projects where maintaining any type of integrity controls is vastly expensive for the professor. Navigating the university sanctions process has become more arduous, and the penalties for cheating students weaker, over the course of my career.

Some of us object, or push back, or try to institute tight controls to prevent it. But fewer and fewer students prove to be trustworthy, much to my chagrin, and they almost never report it when anyone else engages in dishonest behavior. This was true at EY as well; there is a distressing lack of moral courage in our classrooms and in the profession. The SEC enforcement proceeding commented extensively on the EY professionals who knew about it and did nothing. We have normalized this pattern of moral deviance—cheat, notice, roll your eyes—and its corrosive effect on education and professionalism is rarely discussed seriously in our hallowed halls. But it is moral cowardice.

One of the most degrading experiences of my career was watching my students during COVID taking exams on Zoom as if I was a prison guard monitoring the cameras. I always have controls in my face-to-face classes, even more than the students think I do. It is part of recognizing incentives—of trusting but verifying. But it is not dehumanizing; even the term “lockdown browser” makes the hair stand up on the back of my neck. More than the disease itself, or teaching on Zoom, this is what drained away my reserves and diminished my love for the classroom the last few years. It is a huge loss to me.

What are we going to do about it at the university level? I can tell you—absolutely nothing. What we are going to do is to deliver education ever more efficiently and let the chips fall where they may when it comes to the accuracy of student performance evaluations. All COVID has done is teach us new ways we can generate revenue from online programs that are bound to proliferate as a result. And if you think you are controlling cheating in these online programs, short of a CPA-exam-type testing environment, you are fooling yourself. Cheating facilitation firms Course Hero and Chegg have market caps of $14.1 billion and $2.3 billion, respectively. We have seen their impact here in Mays Business School.

I have no idea why the public would trust us as a profession to handle important integrity issues like auditor independence well when we are willing to compromise our integrity for so little. Twenty years on from Andersen’s collapse after Enron and WorldCom, I would have hoped we would have made a case for why the accounting profession deserved an opportunity at redemption, a second chance to be self-regulating after having learned some hard lessons. Instead, we have done the opposite.

There is no case to be made for self-regulation in the accounting profession. We are technically competent, and we can solve a lot of problems for clients. But the public we are assigned to protect, the shareholders and investors, trust us at their peril. It feels just like it did 25 years ago, with the Big 4 firms itching to expand their revenue streams and, if they are not allowed to use the audit to leverage those opportunities, looking for the first opportunity to jettison it and become a consulting firm.

The only reason that accounting is a profession is because we have assumed the responsibility, the duty, to protect the public. In exchange, we are the only ones who can provide an audit. But we have proven unwilling to even assume the duty to take a simple exam honestly. An ethics exam, for heaven’s sake! How can we be trusted to assume larger duties?

The only way to control the behavior of those who refuse their duties is to make the cost high enough to make them stop. When it comes to universities, there is no stomach for that, and I expect no change in the level of cheating we are seeing. But the SEC’s message is this: you have a duty as a profession, whether you recognize it or not. And if you don’t, we will make you pay.

And when you get to that point, you are watching a profession die.

Author: Michael K. Shaub is Clinical Professor and Deloitte Professional Program Director Professor in Mays Business School. You can contact Mike on LinkedIn: https://www.linkedin.com/in/michael-shaub-37475619/.

Blog posted by Dr. Steven Mintz, The Ethics Sage, on August 16, 2022. You can sign up for Steve’s newsletter and learn more about his activities on his website  (https://www.stevenmintzethics.com/) and by following him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage.