Accounting regulator extends probe into EY audit of Thomas Cook
FRC will now investigate Big Four firm’s audits in both 2017 and 2018
The UK’s accounting watchdog has widened the scope of its investigation into EY’s auditing of collapsed travel group Thomas Cook so that it now includes both the years 2017 and 2018.
The Financial Reporting Council in October launched a probe into the Big Four firm’s audit of Thomas Cook’s accounts for the year to September 30, 2018 and said at the time it would keep the scope of the investigation “under close review”. It said today it had decided to extend it to include the year to September 30, 2017.
Thomas Cook collapsed in September after 178 years of operation as rescue talks between banks, shareholders and the UK government fell apart. Since the collapse, the spotlight has focused on the way its accounts reported historic exceptional charges that flattered profits, as well as its treatment of goodwill writedowns and heavy debts.
EY took over as Thomas Cook’s auditor in 2017. Before this, PwC held the role from 2007 to 2016. The two firms have come under fire since the collapse, with MPs accusing both of being “complicit” in its failure.
In a business select committee hearing in parliament in October, MPs criticised the auditors for repeatedly signing off the company’s accounts with a clean bill of health despite admitting they had raised significant risks to its financial stability with its board and had concerns over some of its accounting practices.