EY fined almost £5m for Thomas Cook auditing failures
April 10, 2025
The historic travel agent collapsed in 2019, resulting in 9,000 job losses.
EY has been fined nearly £5 million for breaching auditing standards when it checked the accounts of Thomas Cook before the high street travel agent collapsed in 2019.
The Financial Reporting Council (FRC) said the failings in 2018 were “particularly serious” given Thomas Cook’s precarious financial position at the time.
The historic travel agent collapsed in 2019, resulting in 9,000 job losses and a large-scale effort to repatriate around 150,000 holidaymakers who were overseas at the time.
It rebranded as an online travel company about a year after the chain went bust.
The FRC, which is in charge of regulating auditors and accountants, said it was imposing sanctions on EY and the audit engagement partner at the time, Richard Wilson, for audits it conducted in the 2017 and 2018 financial years.
EY’s initial £6.5 million fine was reduced by 25% to £4.88 million because the firm admitted to serious breaches of standards.
Mr Wilson also saw his individual fine reduced from £140,000 to £105,000.
The breaches related to work on two areas of Thomas Cook’s financial statement, its so-called “goodwill impairment” and “going concern” status which the FRC said were “fundamental to its financial position and performance”.
Failures to audit the goodwill balance – which shows the value of a company beyond its physical assets, such as its customer base or brand reputation – were particularly serious given Thomas Cook’s deteriorating trading performance, the watchdog said.
In terms of the going concern status, EY and Mr Wilson were found to have not properly challenged the company’s management to determine whether there was any uncertainty about Thomas Cook’s ability to keep operating.
Claudia Mortimore, deputy executive counsel for the FRC, 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 years.
“The failings in 2018 are particularly serious given Thomas Cook’s financial position and the heightened risks surrounding the audit work.”
The FRC stressed it was not suggesting the breaches were intentional or reckless and that both EY and Mr Wilson co-operated with the investigation.
EY said it “deeply regrets” that the audits fell below the standards of the watchdog.
“The delivery of high-quality audits remains our priority and we deeply regret that the 2017 and 2018 audits of Thomas Cook fell below the standards that we expect,” a spokesman said.
“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.”
It added that the company was “reinforcing a culture of professional scepticism” within its auditing teams.
[The Independent]
