PwC fined over exam cheating involving 1,100 of its auditors

PwC Canada has been fined more than $900,000 by Canadian and US accounting regulators over exam cheating involving 1,100 of its auditors.

The watchdogs found that the Big Four firm failed to spot that staff were sharing answers in professional exams between 2016 and 2020 because of shortcomings in its internal standards and test supervision.

The Canadian Public Accountability Board fined PwC Canada C$200,000 while the US Public Company Accounting Oversight Board imposed a $750,000 penalty. The PCAOB, overseen by the Securities and Exchange Commission, has powers to sanction foreign accounting firms if they are licensed to carry out work for US clients.

The sanctions are the latest imposed on a big accounting firm over exam cheating.

KPMG was fined $50mn by the PCAOB in 2019, partly for the improper sharing of answers by its auditors, some of whom also manipulated a computer server so they could pass even if they scored less than 25 per cent on the tests.

It fined KPMG Australia $450,000 last year over “improper answer sharing” by more than 1,100 staff from at least 2016 until early 2020.

PwC, which says its purpose is “to build trust in society and solve important problems”, was found to have violated accounting rules and quality control standards because it failed to have proper procedures for overseeing internal training tests, including exams that its auditors are required to pass to maintain their accounting certifications.

The regulators said that as a result, PwC had failed to spot that more than 1,200 employees were involved in improper answer sharing in tests on topics such as auditing, accounting, and professional independence. More than 1,100 of the people involved were in the firm’s assurance practice, which includes its audit function.

PwC Canada, which has 7,000 partners and staff and 21 offices, was also censured and ordered to improve its procedures.

The firm said it had discovered the misconduct in January 2020 and immediately opened an internal investigation. It also reported the matter to regulators voluntarily.

The misconduct mostly involved junior assurance staff, who shared online documents containing answers to internal assessments, it said.

“We have since undertaken several remediation steps including retraining, additional ethics training, financial penalties, written warnings and terminations where warranted,” the firm added. “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.”

Both the Canadian and US regulators acknowledged PwC’s “extraordinary co-operation” with the investigation.