Cheating on professional exams is still a ‘living’ problem at the UK’s biggest audit firms, the accountancy watchdog has warned.
A series of multimillion-dollar fines have already been imposed on major auditing and accounting firms around the world over allegations of cheating in the tests that underpin professional qualifications.
A letter from the Financial Reporting Council (FRC), the UK’s accounting and auditing industry regulator, said its investigation into the matter had already uncovered instances of cheating at audit firms and professional bodies. These were found in some Tier One auditors, a category including the so-called big accountants, KPMG, PwC, Deloitte and EY, as well as Mazars, Grant Thornton and BDO.
“The issues raised by exam cheating therefore remain relevant and their review by the FRC, along with any other regulatory action necessary to address them, is ongoing,” the letter said, suggesting that companies could face further challenges. new penalties. “The profession must therefore be vigilant and seek to continually improve the processes and controls in place in this area. The profession must also strive to maintain a culture of integrity in which the highest standards of professional behavior are upheld.
The letter referred to test scams that caused the US equivalent of the FRC, the Public Company Accounting Oversight Board (PCAOB), to impose a fine of $2m (£1.66m) on KPMG’s UK branch this month.
The PCAOB found that questions were shared before exams. Aside from KPMG’s fine, the watchdog did not name any other companies where it discovered cheating.
Jon Holt, chief executive of KPMG, said he was disappointed with the actions of employees in a statement responding to the PCAOB’s findings. He said the company “took appropriate disciplinary action with everyone involved and has since put in place additional monitoring measures.”
In June, EY has agreed to pay the U.S. Securities and Exchange Commission (SEC) a record $100 million after the SEC discovered professionals cheated on an ethics review and then tried to hide it from regulators. The company said it is in compliance with the SEC order and has taken steps to address compliance issues.
However, rather than naming and shaming where it found shortcomings in its review, FRC said it was “communicating privately with companies” where it had “identified opportunities to improve their controls, policies and procedures.” .
It is understood this is because this is an ongoing investigation and the companies would only be named if the FRC took enforcement action that met a public interest test. It is not known when the investigation could end.
The FRC also found loopholes that could easily allow cheating. These included ‘the possibility for organizations employing students for the audit qualification to become involved in the delivery of professional examinations’, and ‘an option was given to students to take examinations at their employers’.
However, no evidence has yet emerged that these loopholes for potential fraud have been used, the FRC said.
Cheating has been noted in assessments of those studying for apprenticeships awarded alongside vocational qualifications, the FRC said. It would revise the way these exams were conducted, with the aim of preventing and detecting cheating, he said.