Yahoo Finance Accountant EY investigated over Thomas Cook collapse
The auditing watchdog has launched an official investigation into EY over its work on collapsed travel operator Thomas Cook.
The Financial Reporting Council said on Tuesday it had launched an investigation into EY’s auditing of Thomas Cook’s last set of results for the 12 months to September 2018.
If the FRC finds against EY, the company could face millions in fines. The watchdog can fine firms up to £10m and ban individuals involved in flawed audits from the industry. The FRC hit auditors with £43m in fines last year.
The FRC gave no details on the scope of the investigation, but the launch follows reports in the press that Thomas Cook used an excessive amount of “exceptional items” to massage its profit numbers, helping executives reap bigger bonuses and disguising the true health of the business.
Parliament’s Business, Energy, and Industrial Strategy (BEIS) select committee last week launched an official investigation into the collapse of Thomas Cook. Part of the probe will look at whether auditors could have done more to warn of possible dangers.
Rachel Reeves, the chair of the BEIS select committee, said last week that the collapse “shone a light once again on the use of aggressive accounting methods to aid bumper payouts to company executives” and highlighted the “apparent inability of auditors and regulators to curb these practices in the wider interests of shareholders, investors, and the public.”
EY said in a statement: “We will be fully cooperating with FRC during their enquiries. It would be inappropriate to comment further at this time.”
Thomas Cook collapsed last month after struggling with debts of £1.7bn and a weak bookings market. The company had been struggling for years and there has been anger since the collapse that executives made £20m in pay and bonuses in the five years leading up to the company’s failure.
Thomas Cook’s collapse left 150,000 customers stranded, leading to the biggest ever peacetime repatriation effort led by the government. The Civil Aviation Authority said on Tuesday that 106,000 Thomas Cook customers have so far been flown back to the UK.
