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UK regulator finds no ‘systemic’ exam cheating issues


An FRC investigation prompted by the KPMG Australia scandal, among others, is reassured but remains “deeply concerned”.

By Philip King 12 minute read

UK regulators have found no evidence of “systemic issues” over exam cheating at the accountancy giants despite a string of huge fines on operations around the world including on KPMG in Australia.

However, the UK Financial Reporting Council remained “deeply concerned” about exam cheating and its potential impact on audit quality and said further regulatory action might be necessary.

The FRC began investigating the matter in mid-2022 after KPMG in Australia, PwC in Canada and EY in the US were slapped with penalties for exam misconduct.


“On 5 July 2022, we wrote to all Tier 1 audit firms and RQBs [recognised qualifying bodies] asking them to formally set out the preventative and detective controls they have in place to ensure that such incidents should not happen in the UK,” it said in a letter summarising its findings just before Christmas.

“The information that has been provided to us to date has not revealed systemic issues related to cheating at firms or RQBs. However, it has revealed issues that require improvement.

“Affected firms and RQBs have committed to review and/or update relevant policies and procedures. The FRC reserves the right to take further investigation and intervention.”

The letter, signed by FRC executive director of supervision Sarah Rapson, stressed the seriousness of the issue and its impact on the profession’s public standing.

“The importance of identifying and eradicating cheating and of holding those involved in it to account is clear,” Ms Rapson said. “The profession therefore needs to be vigilant and to seek to continually improve the processes and controls in place in this area.

“The profession must also strive to maintain a culture of integrity in which the highest standards of professional behaviour are upheld. The FRC will continue to act to hold firms to account for any shortcomings that might be identified.”

Breaches cited by the FRC include a $US100 million fine on EY last June — the largest ever imposed by the US Securities and Exchange Commission on an audit firm — for “cheating by its audit professionals on exams required to obtain and maintain CPA licenses, and for withholding evidence of this misconduct from the SEC’s Enforcement Division”.

The FRC also referenced the US Public Company Accounting Oversight Board’s $US450,000 penalty on KPMG Australia in September 2021 after it found the firm had “violated PCAOB rules and quality control standards over several years in connection with the firm’s internal training program”.

The KPMG cheating affair put the spotlight on CA ANZ, hundreds of whose members were acknowledged to be involved.

In the wake of the PCAOB findings, the professional body investigated 422 members but quickly became subject to a storm of criticism after announcing last July that it would sanction just eight unnamed members.

Comments by Accountants Daily readers following a report on the CA ANZ findings raised suggestions that the body turned a blind eye to misbehaviour at the Big 4 firms and exam cheating had been rife for years.

“It was general knowledge that the candidates in the bigger firms had access to materials that enabled them to cheat their way through the exam,” said one anonymous correspondent. "This has been going on for more than a decade. The CA ANZ would be hypocrites if they did anything about it now."

Another said: “Typical of CA ANZ. The big firms flaunt the ethical requirements constantly, and CA ANZ does nothing about it.”

CA ANZ announced an examination of its professional conduct procedures with an independent review by former federal court justice Dennis Cowdroy. The body took submissions on the matter until 30 November and the review concludes on 31 May this year.


Philip King

Philip King


Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

You can email Philip on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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