FRC to investigate Thomas Cook auditor following collapse

The Financial Reporting Council (FRC) has announced it will be investigating Thomas Cook’s auditor EY, following its collapse last week which left 21,000 staff out of work and as many as 15,000 British tourists stranded abroad.

The investigation will look into the audit by EY of the financial statements of Thomas Cook for the year ended 30 September 2018, and will be conducted by the FRC’s Enforcement Division under the Audit Enforcement Procedure.

The FRC said it 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”.

It comes after all of the companies in the tour operator’s group, including Thomas Cook Airlines, ceased trading last Monday (23 September), after last-ditch negotiations failed.

All 600 of Thomas Cook’s retail shops have now closed after the company was denied a government bailout of £250m. Insolvency experts from Big Four accounting firm KPMG have been appointed as special managers to Thomas Cooks’ retail and aircraft maintenance divisions.

A KPMG spokesperson said at the time: “Blair Nimmo, Jim Tucker and David Pike of KPMG have been appointed by the court as special managers to the retail division of Thomas Cook on the 23 September following the appointment of the Official Receiver as liquidator.”

It has also recently emerged that the company’s high street shops in England were ‘denied’ a £2.49m tax cut due to government policy.

Real estate adviser Altus Group said that the tour operator should have been a “big winner” under the 2017 business rates revaluation having seen it’s rateable value on its retail stores in England and Wales, which form the basis of the property tax calculation for rates, fall by almost 14% from £32.59m to £28.17m.

However, in order for the Government to help pay for relief to phase in increases for those firms facing sharp rises, strict punitive limits were imposed on tax reductions for those properties in struggling areas where property values and rents plummeted.

Analysis of official government data by Altus Group revealed that, through the policy of ‘Downward Transitional Relief’, which only applies to tax bills in England, the tour operator’s retail stores in England have been ‘denied’ tax reductions of £2.49m under the policy so far since the 2017 revaluation came into effect.