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UK Launches Investigation into Thomas Cook Auditors as Foreign Branches Collapse

The Financial Reporting Council said it will examine whether accountancy firm EY -- which replaced PwC as Thomas Cook's auditors in 2017 -- acted properly in scrutinising its books.


Updated:October 1, 2019, 11:54 PM IST
UK Launches Investigation into Thomas Cook Auditors as Foreign Branches Collapse
Thomas Cook aircraft. (Reuters)

London: Britain launched an investigation on Tuesday into the auditors who signed off on accounts for the now-bankrupt holiday giant Thomas Cook, as the company's French branch went into receivership and its Belgian division collapsed.

The Financial Reporting Council said in a statement that it will examine whether accountancy firm EY -- which replaced PwC as Thomas Cook's auditors in 2017 -- acted properly in scrutinising its books.

"The FRC has commenced an investigation into the audit by EY of the financial statements of Thomas Cook Group Plc for the year ended September 30, 2018," it said.

The regulator "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".

If the watchdog's probe uncovers any wrongdoing, it could spark a severe reprimand and a fine for those involved.

The FRC probe comes after a parliamentary business committee launched its own inquiry on Thursday into Thomas Cook's management conduct, pay, accounting and auditors, and regulation.

Also on Tuesday, the French arm of Thomas Cook said that a commercial court had placed it in receivership, and that "several serious candidates" had already shown interest in buying the company.

Thomas Cook France, which employs 780 people, had already declared insolvency last week in the wake of its parent company's bankruptcy.

It said the court in Nanterre, outside Paris, had set a deadline of October 22 for potential takeover bids, and a new court hearing on November 5 to examine any offers.

"The goal is to ensure continued operations for the French subsidiary and rapidly find a takeover solution," Thomas Cook France said.

No candidates have so far come forward publicly, and the number one French player, TUI France, declined to comment last week.

The French arm of Thomas Cook owns 172 travel agency shops generating annual revenue of 425 million euros (USD 464 million), and the bankruptcy initially stranded some 10,000 French clients.

In neighbouring Belgium meanwhile, a commercial court in Ghent declared the local travel agency business of Thomas Cook bankrupt, putting 500 jobs at risk.

Thomas Cook Retail Belgium is the group's largest Belgian subsidiary and the fourth and final one to collapse in the wake of the parent company's failure.

Debt-plagued Thomas Cook collapsed last week after a lengthy period of financial turmoil, leaving 22,000 staff jobless and 600,000 passengers of different nationalities stranded around the world.

Britain's Civil Aviation Authority (CAA) regulator said Tuesday that it has now flown home 115,000 UK nationals out of the 150,000 who were left stranded.

Irish low-cost airline Ryanair on Tuesday urged closer regulation on the sector.

"The CAA has done a very good job," said Ryanair chief marketing officer Kenny Jacobs. "There needs to be new and improved type of stress tests put in place. If an airline is weak financially that airline and the shareholders should be forced by the CAA to put reserves aside to cover the cost of repatriating customers if they get to that situation. That's not the case today and hence the UK taxpayers are the ones paying the bill."

The Department of Transport expects that the cost of the repatriation operation will come to about 100 million pounds (113 million euros, USD 124 million).

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