The accounting watchdog has warned that cheating in professional exams remains a “live” issue at the UK’s largest audit firms.
A string of multimillion-dollar fines have already been issued to major auditing and accounting firms around the world over allegations of cheating on exams supporting professional qualifications.
A letter from the Financial Reporting Council (FRC), Britain’s accounting and auditing industry regulator, said its investigation into the case had already uncovered cases of fraud at auditing firms and professional bodies. These are found in some top-notch auditors, a category that includes the so-called Big Four accountants, KPMG, PwC, Deloitte and EY, along with Mazars, Grant Thornton and BDO.
“The issues raised by exam cheating remain, and their consideration by the FRC, and any other regulatory action required in response to them, continues,” the letter states, suggesting that the companies could face new penalties. Therefore, the profession must be vigilant and constantly strive to improve the processes and controls in place in this field. The profession must also strive to maintain a culture of integrity in which the highest standards of professional conduct are adhered to.”
The letter referred to the test frauds that caused the Public Company Accountability Oversight Board (PCAOB) to fine KPMG’s UK arm KPMG $2m (£1.66m) this month.
The PCAOB found that questions were shared before exams. Aside from KPMG’s fine, the watchdog did not name other companies in which it disclosed fraud.
KPMG CEO John Holt said he was disappointed with the employees’ actions in a statement in response to the PCAOB’s findings. He said the company “took appropriate disciplinary action with all those involved and has since put in place additional monitoring measures.”
In June, EY agreed to pay a record $100 million to the SEC after the SEC found that professionals cheated on an ethics test and then tried to hide it from regulators. The company said it is complying with the SEC’s order and has taken steps to address compliance issues.
However, rather than name and shame as it found shortcomings in its review, the FRC said it “communicates privately with companies” as it “identified opportunities to improve their controls, policies and procedures”.
This is understood because it is an ongoing investigation, and companies will only be named if the FRC takes enforcement action that meets a public interest test. It is not clear when the investigation might end.
The Armed Forces Council also found loopholes that could easily allow fraud. These included “the possibility for organizations employing students studying for an auditing qualification to be involved in providing professional examinations”, and “there was an option available for students to take examinations at their employers”.
However, no evidence has emerged so far that these loopholes have been used for possible fraud, the Supreme Council said Tuesday.
Cheating has been observed in the assessments of those studying for apprenticeships that were offered alongside vocational qualifications, the FRC said. It added that it would review how these checks were conducted, taking into account fraud prevention and detection.
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