Financial watchdog extends its probe into Thomas Cook

THE UK’S financial services watchdog has extended its investigation into the collapse of package holiday giant Thomas Cook.

The Financial Reporting Council (FRC) announced that its enforcement division will now analyse financial statements by Thomas Cook’s auditors EY stretching back to September 2017.

Thomas Cook, the world’s oldest travel firm, collapsed in September after failing to produce a funding lifeline, affecting 9,000 jobs.

A week after the company’s collapse, the FRC launched an investigation in EY’s audit of Thomas Cook’s accounts and said it would delve into its statements for the period to September 30, 2018.

The watchdog said it will now extend its inquiries by a further year, more than two months after starting the process, but did not reveal any of its current findings.

EY, one of the UK’s big four auditors, started completing Thomas Cook’s audit work in 2017 after taking over from rival PwC.

Over the past two years, the collapsed tour operator had three different finance chiefs as it failed to drive profitability and reduce the company’s significant debt burden.

In May, Thomas Cook reported a £1.5bn half-year loss and issued its third profit warning in a year in a set of accounts which also saw EY warn that there was “significant doubt” over whether the travel firm could continue as a going concern.

The FRC said: “The matters being investigated by the Financial Reporting Council concerning EY’s audit of the financial statements of Thomas Cook Group for the year ended September 30, 2018 will now include an investigation into EY’s audit of Thomas Cook’s financial statements for the year ended September 30, 2017. The FRC will continue to keep the scope of the investigations under close review.”

The FRC aims to complete all of its investigations within two years and has the power to take EY to tribunal if it finds evidence of wrongdoing.

A Government-backed review has recommended the audit sector should be independent from the wider accounting profession as part of sweeping reforms.