BBC story raises questions over EY's audit of travel firm

New revelations about Thomas Cook’s final months have created disquiet within industry on how auditors work with famous names like the travel firm ahead of their demise. ICSM Credit’s associates managed to escape the worst of the debts left by the collapse of Thomas Cook but questions are now being raised in parliament over the bonuses enjoyed by the directors such as the boss Manny Fontenla-Novoa (pictured) when thousands of their workers are now unemployed.

There have been several theories why the 178-year-company hit the rocks including the package holiday market shrinking, the merger with My Travel, historic debt as well as mismanagement highlighting in particular the bonus paid to the directors.

That theory about mismanagement has gathered some credence with a BBC business story about the massive bonuses paid to the directors after EY audited the firm this summer giving it a clean bill of health.

There have been questions raised over how the big four accountancy firms audit companies as healthy for them to crash weeks later. Questions have been raised in parliament with an enquiry mounted. The BBC investigation will compound the theory there was something wrong with the audit.

The BBC article written by journalists Howard Mustoe, Dan Box and Alys HarteFile said: “Audit firm EY, which signed off on Thomas Cook's financial health before its collapse, also wrote a report used to award its former boss a £5m bonus.The bonus, paid to former boss Manny Fontenla-Novoa, followed a heavily-criticised 2007 merger with MyTravel. Senior EY staff will on Tuesday appear before a panel of MPs investigating Thomas Cook's collapse.

“The audit firm, which also faces an investigation by the Financial Reporting Council, declined to comment. Christine Cooper, chair in accounting at the University of Edinburgh's Business School, questioned the ability of auditors to provide truly independent advice when they are paid for by the company they audit and, as in the case of EY, may have provided them with other advice in the past.”

ICSM Credit understands that one of its members managed to claw back some of the cash it was owed during August but lost a much smaller amount when the firm collapsed in September. It is another example of how ICSM’s informal grapevine works with companies being hearing of problems at an early date.

For the full story see https://www.bbc.co.uk/news/business-50099288

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