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UK accounting watchdog launches investigation into Thomas Cook audit

EY signed off on group’s 2018 accounts as a going concern

Former Thomas Cook employees hold placards as they demonstrate outside of Manchester Central convention complex at the annual Conservative Party conference at the in Manchester. Photograph: Ben Stansall/AFP/Getty Images

Tue Oct 1 2019 - 09:26

The UK's accounting watchdog has launched an investigation into EY's 2018 audit of Thomas Cook in the wake of the collapse of the 178 year-old travel group last week.

The Financial Reporting Council said on Tuesday that its enforcement division would carry out the probe into the Big Four accounting firm, which took over as Thomas Cook’s auditor in 2017.

EY in October signed off on the travel group’s 2018 accounts as a going concern, meaning it had judged that the business could survive another 12 months.

It later said at Thomas Cook’s interim results in May that there was a “material uncertainty related to going concern” linked to a new financing agreement. The company disclosed that month that it had agreed a new £300 million lending facility.

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Thomas Cook collapsed last Monday after rescue talks between banks, shareholders and the UK government fell apart. Since the collapse, the spotlight has been placed on the way its accounts reported historic exceptional charges that flattered profits, as well as its treatment of goodwill writedowns and heavy debts.

The FRC, which had also been considering an investigation into PwC, Thomas Cook’s previous auditor since 2008, said it would “keep under close review” both the scope of its investigation and the question of whether to open any further probes.

The regulator has the power to fine audit firms up to £10m and can also bring disciplinary proceedings against and ban individual accountants. Last year it levied £43m of fines on large accounting firms. – Copyright Financial Times

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