Accountants cheated in online ethics exams after switching to Covid home working

Scores of accountants cheated in ethics exams after online tests were introduced during the pandemic home working boom, regulators have revealed.

The Financial Reporting Council (FRC) said it had uncovered examples of rule-breaking following the proliferation of online tests at major accounting firms during the pandemic. Unsupervised online tests were introduced as companies scrambled to adapt to Covid restrictions that barred staff from using offices.

Dozens of trainee accountants at the country’s seven biggest auditing firms were found to have swapped answers by email or messaging services such as Whatsapp on a handful of occasions.

In a letter published on Wednesday, the FRC warned Britain’s top accountants to crack down on cheating following a string of embarrassing scandals.

An investigation was launched by the watchdog over the summer following what it said were deeply concerning reports of cheating in the US, Canada and Australia, triggering fears that similar practices were happening in the UK

US regulators later revealed a massive cheating scandal at KPMG involving hundreds of staff, including some in the UK, leading to a total of $7.7m in fines for the “Big Four” firm.

Apart from that case, the FRC found only a small amount of cheating at unnamed firms during internal exams on subjects such as ethics and compliance, rather than external exams counting towards qualifications.

Sarah Rapson, the FRC’s executive director of supervision, told the Telegraph cheating was not “systemic” but said the FRC found two or three instances of cheating involving less groups of between 10 and 20 people.

She said: “Cheating is cheating and people expect auditors to be a profession of trust.

“It is just as important to not cheat in an internal exam as an external exam. Auditors should act with integrity.”

The use of online tests has grown in the accounting and auditing industry largely as a result of the pandemic, which forced many companies to use them to educate trainees at a time when many were forced to work remotely from home.

However, Ms Rapson insisted home working did not make cheating any easier and said the problems associated with online tests would still exist if taken in the office.

In a letter to UK firms on Wednesday, Rapson said: “The importance of identifying and eradicating cheating and of holding those involved in it to the account is clear.

“The profession therefore needs to be vigilant and to seek to continually improve the processes and controls in place in this area.

“The FRC will continue to act to hold firms to account for any shortcomings that might be identified.”

The FRC’s intervention comes after EY was fined a record $100m (£82m) in the US after admitting that nearly 50 auditors had cheated on the ethics portion of the Certified Public Accountant (CPA) exam.

Bosses also misled American regulators about the misconduct and hindered their investigation.

The US Securities and Exchange Commission denounced what it said were “breaches of trust by gatekeepers… entrusted to audit many of our nation’s public companies”.

In separate cases, PwC was fined by US and Canadian regulators for failing to stop 1,200 employees from sharing answers during accounting exams, while in Australia all 600 of KPMG’s partners and thousands of staff were made to resit an independence exam over similar claims.

The cheating scandals come on the heels of several auditing fiascos, which have led to calls for tougher regulation of the industry.

Accounting firms were accused by MPs of “feasting” over the “carcass” of construction giant Carillion in the years before its collapse, banking more than £70m in fees but failing to sound the alarm about its parlous finances.

KPMG was told earlier this year that it faces a £14m fine – one of the biggest in British auditing history – over “extremely serious” findings that staff forged documents and misled regulators about audits.


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