Following the collapse of leisure company Thomas Cook, UK financial investigators have initiated a probe into the auditing of the Group’s last full-year financial statement
Thomas Cook Group’s audit was carried out by EY which had secured the right to be the company’s external auditor in 2017.
Thomas Cook Group’s audit committee reviewed EY’s effectiveness following the completion of the 2016-17 and 2017-18 financial years.
The review considered such matters as competence, effectiveness in identifying risks and understanding of the business. In both years the committee concluded that EY had conducted an “effective and independent” audit of the accounts
EY’s audit report highlighted a number of specific risk areas. Particular attention was paid to whether the going-concern basis of the accounting was appropriate, although it identified no significant uncertainty.
EY also claimed that goodwill relating to the UK tour operator division was the “most sensitive” to possible changes in key assumptions which could trigger an impairment.
Thomas Cook Group disclosed a £1.1 billion impairment of UK-related goodwill in its six-month financial statement to 30 March 2019, which placed the company into a heavy loss and left it insolvent.