Ever since KPMG was fined $50 million by the SEC in June 2019 as a result of auditors at all levels cheating on internal online training exams by illegally sharing answers with colleagues and manipulating test results (as well as that whole KPMG audit partners stealing confidential inspection information from the PCAOB thing), we have learned that employees passing around the answers to mandatory internal training exams happens quite a bit in the Big 4. And it’s always the auditors doing the cheating.
After working 12-plus hours a day, the last thing these people want to do is watch some annoying training video on their laptop about cybersecurity, auditor independence, ethics, and/or sexual harassment—and then have to answer questions about what they just watched. One source told us:
Everybody shares answers. To think that no one does is naive. But be smart about sharing your answers. Don’t do electronic sharing. We pass around the answers the old-fashioned way—on paper, like on a Post-It note—and then shred the paper. We work long hours and are expected to take the same training tests every year. We’re overworked and underpaid, and we don’t have time for that.
It ain’t cheating if you don’t get caught, right? Well, more Big 4 firms are getting caught—and fined by regulators. And the fines would be much harsher if these firms hadn’t self-reported the internal training cheating to regulators. The PCAOB fined KPMG Australia $450,000 on Sept. 14, 2021, for training-related misconduct that occurred from 2016 until early 2020 and involved more than 1,100 KPMG partners and staff, including more than 250 of its auditors. These KPMGers took part in an answer-sharing scheme—either by providing or receiving answers—on mandatory training courses covering topics that included independence, auditing, and accounting.
We have also heard rumors that EY in the US fired a bunch of people, including partners, a couple years ago for cheating on internal training courses. Here’s a tip we got in September 2020 regarding the cheating at EY:
The firm has launched an investigation reviewing employees’ emails as far back as 2015 to identify people who have either sent or received (and not reported) answers for internal web based learnings. The process has lacked transparency and punishments have been subjective ranging from one time fines ($500), salary reduction or termination. One SM posted in the EY Fishbowl that s/he was able to argue for one of their team members to not get fired. Timing seems convenient given Covid.
The firm is taking 3-6 months to hand out punishments from the time of initial contact with employees identified through the email search. They are instructing employees to not discuss with anyone and sign NDAs, completely isolating the employees and leaving them in an anxious state of waiting. This is widespread, with the greatest impact on the audit practice. The firm is unaware that staff and seniors continue to share answers but are doing so via personal email to avoid detection. This has impacted managers and SMs the most so far as it relates to all the way back in 2015. The firm is refusing to acknowledge the collaborative culture beginning in audit 101 trainings where the facilitators share answers for the training assessment and encourage staff to work with each other to pass the assessment. This is a culture problem that needs to be addresses at the source rather than using it as another way to reduce headcount.
EY hasn’t been punished by regulators for the alleged internal training cheating our tipster mentioned above. But a Big 4 firm that was recently punished for test cheating is PwC Canada, which was fined $750,000 by the PCAOB on Feb. 24 and $200,000 by the Canadian Public Accountability Board on Feb. 25. According to the PCAOB, from 2016 to early 2020, more than 1,200 PwCers were involved in improper answer sharing—either by providing or receiving answers—in connection with online tests for mandatory internal training courses covering topics that included auditing, accounting, and professional independence. And at least 1,100 of these employees were from PwC Canada’s assurance practice.
The PCAOB disciplinary order goes on to say:
From at least 2016 to early 2020, more than 1,200 PwC Canada personnel were involved in improper answer sharing related to training tests. Firm personnel primarily shared answers through use of several shared drives that professionals had created on the Firm’s computer network (the “Shared Drives”), and on which professionals had posted the answers for others to view and provide supplemental answers. In addition, individuals shared answers by sending emails with attached documents containing answers to training test questions, by providing answers in hard copy documents, or by discussing answers when taking tests in the presence of others.
Instances of improper answer sharing primarily occurred in connection with tests that were a part of the Firm’s mandatory Assurance training. The Shared Drives contained answers for at least 46 of the Firm’s approximately 55 mandatory Assurance tests, as well as answers for some mandatory Firm-wide tests containing content concerning professional integrity and professional independence.
Improper sharing of training test answers occurred among junior staff, managers, directors, and partners at the Firm. After Firm leadership learned of the practice, it conducted an internal investigation. The Firm’s investigation revealed that the misconduct was widespread within the Firm’s audit practice, including among those who performed work on audits governed by PCAOB standards. At least 1,100 professionals in the Firm’s Assurance practice were involved in answer sharing.
As illustrated by the misconduct described above, from 2016 to early 2020, PwC Canada failed to establish policies and procedures, including monitoring procedures, to provide the Firm with reasonable assurance that (1) Firm personnel performed all professional responsibilities with integrity; (2) personnel to whom work was assigned had the degree of technical training and proficiency required in the circumstances; and (3) personnel participated in general and industry-specific continuing professional education that enabled them to fulfill responsibilities assigned and satisfy applicable continuing professional education requirements of regulatory agencies. Accordingly, the Firm violated PCAOB quality control policies related to integrity and personnel management.
The PCAOB noted that the fine would have been much higher had there not been “extraordinary cooperation in this matter” from PwC Canada:
The Firm voluntarily self-reported the matter to PCAOB staff after learning about the misconduct. Additionally, the Firm promptly instituted remedial measures, including conducting periodic searches across certain Firm systems to identify improper answer sharing, and requiring personnel to re-take certain training and testing. Absent the Firm’s extraordinary cooperation, the civil money penalty imposed would have been significantly larger, and the Board may have imposed additional sanctions.
In an unprecedented move, PwC Canada released a statement from CEO Nicholas Marcoux regarding the test cheating—and posted it on its website! Usually us reporters have to beg and grovel (and oftentimes get ignored) for some kind of decent response from the firm’s PR machine regarding an incident like this. Marcoux said:
At PwC Canada we are committed to serving our stakeholders to the best of our ability and in accordance with our values and purpose – to build trust in society and solve important problems. When we do not meet the standards we set for ourselves, we acknowledge it and take action to do better.
To help ensure we have the best people delivering the highest quality work to our clients, we invest in their professional development and rigorous training that exceeds the requirements of our profession.
In early 2020, it came to our attention that some of our people, primarily junior-level Assurance employees, shared online documents containing answers to some internal assessments as part of this additional training. Taking this seriously, PwC Canada immediately opened an extensive investigation with the assistance of external resources and voluntarily disclosed this matter to the regulators.
We have since undertaken several remediation steps including retraining, additional ethics training, financial penalties, written warnings and terminations where warranted.
PwC Canada and each of CPAB and PCAOB have reached settlements with respect to this matter. CPAB has released a public order which imposes sanctions on the firm including costs in the amount of $200,000. PCAOB has also released a public order which imposes sanctions on the firm including a financial penalty in the amount of US$750,000. Both CPAB and PCAOB credit PwC Canada for extraordinary cooperation.
While we are confident there has been no impact or compromise to the quality of our audits as evidenced by our current inspection results, we expect more from everybody in our firm. All of us must consistently live our values and purpose for PwC Canada to be recognized as having the best people in professional services delivering the highest quality work.
We value the trust that our clients and community put in us, and we remain committed to ensuring that we continue to earn this trust every single day.
Because “trust” is a big deal at PwC. PwC is a name you can “trust.” If you don’t believe them, they’ll tell you that a couple dozen times in a conversation. But we don’t trust that cheating on internal training exams will never happen again at a PwC firm.
SEC Says $50 Million Fine For KPMG Is ‘Significant’ and ‘Appropriate’ For All That Cheating Going On
KPMG Australia Audit Partners and Staff Didn’t Get Away with Cheating on Internal Training Exams Either