The Press and Journal (Aberdeen and Aberdeenshire)
Auditors for Thomas Cook to be inspected
Investigation: Regulator to check whether they acted properly
Thomas Cook’s auditors are to be investigated over their role in signing off the last set of accounts for the travel firm prior to its collapse, the accounting regulator has announced.
Financial Reporting Council (FRC) said it would look at whether EY acted properly in scrutinising the numbers in 2018 and could censure the individual accountants or the financial services giant itself.
The decision came as the Insolvency Service, which is overseeing the liquidation process, revealed that some ex-Thomas Cook staff who have applied for unpaid wages have been wrongly told they will not be entitled to holiday pay.
A new statement on the department’s website for those affected by the collapse said: “Some employees have received a letter telling them they will not be paid holiday pay.
“This may be because the information we have so far received from Thomas Cook doesn’t say that you are owed holiday pay. Claims rejected for this reason are being individually reviewed, without the need for re-submission and will be paid as soon as we can verify what is owed.”
The FRC inquiry comes less than a week after Parliament’s Business, Energy and Industrial Strategy (BEIS) select committee demanded the appearance of executives and auditors for a hearing.
MPs on the committee are particularly keen to look at the bonuses awarded to bosses and EY’s role in auditing.
EY replaced PwC as auditors in 2017 and told Thomas Cook accountants they should stop claiming regular costs on the balance sheet as “one-off ” items.
A common practice for businesses is to strip out “one-off ” costs from certain profit measures, but critics argue this could be seen as a route to flattering the numbers.
If the FRC’s investigation finds any wrongdoing, it could lead to a severe reprimand and a fine.
The audit sector has faced a barrage of criticism in recent years, with the government vowing to tighten up the industry.
One of the problems is the Big Four accounting giants – PwC, EY, Deloitte and KPMG – offer numerous financial services to businesses.
This runs the risk of creating conflicts of interest and independence questions, but the Big Four are keen to promote other services and advice.
Business Secretary Andrea Leadsom has also set up a Thomas Cook taskforce to ensure lessons are learned and to deal with the company’s liquidation, which is being run by the government’s official receiver.