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Thomas Cook auditors EY investigated over checking of tour operator’s books before collapse.

Published October 04, 2019

Thomas Cook auditors EY investigated over checking of tour operator’s books before collapse.

Thomas Cook’s auditor is under investigation by the accounting watchdog over its work for the collapsed tour operator.

The Financial Reporting Council (FRC) announced on Tuesday that it has opened a probe into EY, as audit firms are increasingly in the spotlight over their potential role in several high-profile company failures.

The FRC said it will look at EY’s audit of Thomas Cook’s financial statements for the year ending 30 September 2018, adding that the probe could be broadened if require.

That could spell trouble for EY’s Big Four rival, PricewaterhouseCoopers, which was Thomas Cook’s auditor until 2016.

After EY took over, it told Thomas Cook’s internal accountants they should stop reporting regular costs as one-off or “exceptional” items, as they had been doing.

Companies often strip one-off costs out in order to give what they feel is a truer reflection of underlying performance.

The practice also potentially boosted Thomas Cook executives’ bonuses, which were based partly on underlying profits before tax.

Rachel Reeves, chair of the Business, Energy and Industrial Strategy (BEIS) Committee, said last week that people are “appalled that as Thomas Cook mounted up debt and as the company headed for trouble, company bosses were happily pocketing hefty pay packages”.

Analysts have also questioned why it took Thomas Cook more than a decade to write down the value of its MyTravel business, eventually realising a £1bn loss this year.

Article Credit:Ben Chapman Independent - https://www.independent.co.uk/news/business/news/thomas-cook-collapse-latest-audit-ey-pwc-investigation-accounts-watchdog-a9127906.html