UK regulator fines EY £4.9m over Thomas Cook audits

London — The UK’s Financial Reporting Council said on Thursday it had fined the “big four” accountancy firm EY £4.9m for “significant breaches” of standards on audits of Thomas Cook before its collapse in 2019.

EY and partner Richard Wilson had admitted serious breaches when assessing the travel company’s financial statements for the financial years 2017 and 2018, the regulator said in a statement.

Thomas Cook, the world’s oldest travel firm dating back to the early 1840s, collapsed in 2019 after it failed to finalise a restructuring plan, stranding more than 100,000 passengers. Chinese company Fosun later acquired the company’s brand, before selling it to Polish travel platform eSky Group last year.

EY was given a financial sanction of £6.5m, which was discounted by 25% because it admitted failings. Partner Richard Wilson was fined £140,000, discounted to £105,000 for the same reason.

The breaches related to assessing Thomas Cook’s goodwill impairment level and going concern status, as well as adequately considering the risk to EY’s independence during the 2018 audit, the watchdog said.

“EY and Mr Wilson’s failure to challenge robustly and to apply sufficient professional scepticism in these crucial areas led to significant breaches of auditing standards in both audit year,” said Claudia Mortimore, the regulator’s deputy executive counsel.

“The failings in 2018 are particularly serious given Thomas Cook’s financial position.”

A spokesperson for EY said the two audits highlighted by the council had fallen “below the standards we expect”.

“We are committed to learning from these mistakes and have strengthened our procedures, training and guidance, as well as our global audit methodology, to address the issues identified,” the spokesperson added.

Reuters