Question: As an organisational developer, critically discuss how transactional leadership and transformational leadership may result in a positive turnaround for Ernst and Young in context of the article above.

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Ernst & Young to Pay $100 Million Penalty for Employees Cheating on CPA Ethics
Exams and Misleading Investigation
Largest Penalty Ever Imposed by SEC Against an Audit Firm
Washington D.C., June 28, 2022
The Securities and Exchange Commission today charged Ernst & Young LLP (EY) for cheating
by its audit professionals on exams required to obtain and maintain Certified Public Accountant
(CPA) licenses, and for withholding evidence of this misconduct from the SEC’s Enforcement
Division during the Division’s investigation of the matter. EY admits the facts underlying the
SEC’s charges and agrees to pay a $100 million penalty and undertake extensive remedial
measures to fix the firm’s ethical issues.
“This action involves breaches of trust by gatekeepers within the gatekeeper entrusted to audit
many of our Nation’s public companies. It’s simply outrageous that the very professionals
responsible for catching cheating by clients cheated on ethics exams of all things,” said Gurbir
S. Grewal, Director of the SEC’s Enforcement Division. “And it’s equally shocking that Ernst &
Young hindered our investigation of this misconduct. This action should serve as a clear
message that the SEC will not tolerate integrity failures by independent auditors who choose
the easier wrong over the harder right.”
EY admits that, over multiple years, a significant number of EY audit professionals cheated on
the ethics component of CPA exams and various continuing professional education courses
required to maintain CPA licenses, including ones designed to ensure that accountants can
properly evaluate whether clients’ financial statements comply with Generally Accepted
Accounting Principles.
EY further admits that during the Enforcement Division’s investigation of potential cheating at
the firm, EY made a submission conveying to the Division that EY did not have current issues
with cheating when, in fact, the firm had been informed of potential cheating on a CPA ethics
exam. EY also admits that it did not correct its submission even after it launched an internal
investigation into cheating on CPA ethics and other exams and confirmed there had been
cheating, and even after its senior lawyers discussed the matter with members of the firm’s senior management. And as the Order finds, EY did not cooperate in the SEC’s investigation
regarding its materially misleading submission.
In addition to paying a $100 million penalty, the Order requires EY to engage in extensive
undertakings, including retaining two separate independent consultants to help remediate its
deficiencies. One consultant will review the firm’s policies and procedures relating to ethics and
integrity. The other will review EY’s conduct regarding its disclosure failures, including whether
any EY employees contributed to the firm’s failure to correct its misleading submission.
“The SEC will not permit the submission of misleading information or any action that delays or
frustrates our mandate to protect investors and our markets,” said Melissa R. Hodgman,
Associate Director of the SEC’s Enforcement Division. “Ernst & Young faces significant
sanctions and extensive remediation to ensure that its culture and conduct meet the ethical
standards required of those responsible for the integrity of our capital markets.”
The Order finds that EY violated a Public Company Accounting Oversight Board (PCAOB)
rule requiring the firm to maintain integrity in the performance of a professional service,
committed acts discreditable to the accounting profession, and failed to maintain an
appropriate system of quality control. EY has admitted the facts underlying these findings and
acknowledged that its conduct violated the integrity standard and provides a basis for the SEC
to impose remedies against the firm pursuant to Sections 4C(a)(2) and (a)(3) of the Exchange
Act and Rules 102(e)(1)(ii) and (iii) of the Commission’s Rules of Practice.
The SEC’s investigation, which is continuing, has been conducted by Ian Rupell and
supervised by Rami Sibay. The SEC thanks the PCAOB for its assistance in this matter.
Source: U.S. SECURITIES AND EXCHANGE COMMISSION, 2022

Question: As an organisational developer, critically discuss how transactional leadership and transformational leadership may result in a positive turnaround for Ernst and Young in context of the
article above.