Tammy Nguyen-Thach

Reading the Articles

Reading Assignment: Ernst & Young Ethics Article

Ernst & Young (EY) is one of the “Big Four” accounting firms, along with Deloitte, KPMG, and PwC. These firms are considered among the most prestigious in the world, known for delivering services in auditing, tax, consulting, and advisory. EY operates across numerous countries and works with many of the world’s largest and most influential companies. Given its global reputation, it was especially surprising when the SEC fined EY $100 million after discovering that some of its auditors had cheated on their CPA exams.

Please read the article provided in the link below, which discusses the Ernst & Young (EY) scandal and its broader implications for corporate ethics and stakeholder trust.

Article Links

Click on photos below to access the articles. If the links aren’t working, you can manually enter the URLs in your browser. Make sure to read carefully and attentively. Use the knowledge from the flashcards to help you better understand the articles and their key topics.

Topic Review

Ethics vs. Profitability

By trying to deceive regulators and failing to put proper controls in place, EY risked more than just its reputation. It also lost the trust of its clients, employees, and others who depend on it, which is crucial for long-term success (Alpert 2022).

The textbook argues that ethical business leadership requires companies to “give thought to what is best for all who have a stake in their companies,” not just stockholders (Felvegi et al., 2020). EY’s failure to maintain its integrity ultimately violated this principle, as the firm harmed its clients, employees, and the broader financial system by undermining trust in the auditing profession.

Corporate Social Responsibility (CSR)

This case also highlights the importance of corporate social responsibility (CSR), which the textbook describes as a business’s “implicit agreement” to operate in a way that benefits society as a whole (Felvegi et al., 2020). In exchange for the privilege of doing business, companies owe a duty to uphold ethical standards – something EY blatantly disregarded when it misled the SEC.

Conclusion: Long-Term Impacts of Ethical Failures

EY’s downfall reinforces the textbook’s central claim: “Positive goodwill generated by ethical business practices, in turn, generates long-term business success” (Felvegi et al., 2020). While cutting corners may lead to short-term financial gains, history has shown that this will not be sustainable in the long run. By prioritizing compliance and transparency, businesses not only avoid costly penalties but also build lasting trust with their stakeholders.

References:

Alpert, B. (2022, June 28). Ernst & Young to pay $100 million penalty for employees cheating on CPA ethics exams and misleading investigation. U.S. Securities and Exchange Commission.

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Presse, A. F. (2022, June 28). Record Ernst & Young Fine in US for cheating on ethics exams.