/MPs to grill Thomas Cook auditors

MPs to grill Thomas Cook auditors


Published on Tuesday, October 22, 2019

Senior staff from audit firm EY, which signed off Thomas Cook’s financial health before its collapse, will today appear before a panel of MPs investigating the firm’s demise.

The audit firm, previously known as Ernst & Young, also faces a probe by the Financial Reporting Council.

It is expected to be questioned today by the Business, Energy and Industrial Strategy select committee about a report it wrote that was used to award former Thomas Cook CEO Manny Fontenla-Novoa a £5 million bonus, said the BBC.

The bonus was paid after he orchestrated a much-criticised merger in 2007 with MyTravel.

The company’s annual report shows the bonus was paid following ‘an independent review of synergy benefits’ undertaken by EY in September 2008.

“These additional synergies include improved terms negotiated with accommodation providers and overseas agents together with increased hotel settlement income.

“Such synergies being enhanced as a consequence of a healthier negotiation position post merger,” the annual report said.

In May 2019, Thomas Cook made a first-half loss £1.5 billion, of which £1.1 billion was due to the decision to write down the value of MyTravel.

At the time, EY said there was ‘significant doubt’ whether Thomas Cook could continue as a going concern.

Select committee chair Rachel Reeves told the BBC both EY and PwC, which audited Thomas Cook before 2017, could expect tough questioning at today’s hearing.

“I think we should be able to claw back bonuses and salary when directors are culpable for running a company into the ground. But you should also have checks and balances, and the checks and balances are the auditors, are the regulators,” she said.

“All of them have questions to answer about the extent to which they were asking the tough questions the directors didn’t want to answer,” she said.

Manny Fontenla-Novoa and his immediate successor at Thomas Cook, Harriet Green, are due to be appear before the select committee tomorrow.

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