Written by: Keith Tully
Published: 1st October 2019
The UK’s accounting regulator has announced it will be looking into the details of work done by the auditors of the recently collapsed travel and holiday company Thomas Cook.
EY, one of the so-called Big Four accountancy and advisory firms, had been the company’s auditor prior to its recent demise, with its work in that context now set to come under scrutiny.
The Financial Reporting Council (FRC), which oversees and regulates auditing and accounting activities across the country, has said it will be looking at whether EY acted properly in its dealings with Thomas Cook, particularly in reference to its accounts for 2018.
Roughly 9,000 people from the UK lost their jobs last month when Thomas Cook went into compulsory liquidation on September 23rd, while tens of thousands of the company’s customers were left stranded overseas.
“The investigation will be conducted by the FRC’s enforcement division under the audit enforcement procedure,” the FRC explained in a series of statements.
“The FRC will keep under close review both the scope of this investigation and the question of whether to open any other investigation in relation to Thomas Cook, liaising with other relevant regulators to the fullest extent permissible.”
On September 26th, the Business, Energy and Industrial Strategy (BEIS) Committee at the House of Commons announced that it would be launching an inquiry into the situation at Thomas Cook prior to its collapse into liquidation.
The BEIS committee made clear it would be investigating “issues around the stewardship of the company, executive remuneration, accounting practices and the role of auditors”.
The committee has also made clear that its inquiry will be looking at how smaller businesses and suppliers to Thomas Cook have been or will be impacted by the travel firm’s liquidation.
Plans are to see representatives of the FRC, the Insolvency Service and EY brought before the BEIS Committee in Westminster to give evidence.
“The BEIS Committee has a long-standing interest in corporate governance, executive pay, and audit reform which we are keen to follow up in this inquiry,” said Rachel Reeves MP, chair of the committee.
“The main players in the sad demise of Britain’s oldest travel firm should face public scrutiny and be held to account for their actions before the company collapsed,” she said.