Thomas Cook’s auditors are being questioned over its collapse by MPs. Hemione Hudson, Head of Audit at PwC, which audited the company from 2007 to 2016, said they are happy with their audits in general. “We stand by our opinion,” she said.
Paul Cragg, who audited it from 2013-2016 says they challenged Thomas Cook management a few times on their exceptional items. These are costs which Thomas Cook liked to disclose separately, but PwC said should be in the main income statement.
EY won the business from PwC because Thomas Cook preferred the “partner model” EY put forward, says PwC’s Hermione Hudson. EY offered one partner rather than two. “It’s disappointing not to win work,” she said.EY audited 2017 and 2018 and the half year of 2019. In 2018, EY challenged Thomas Cook on those so-called exceptional items as well as goodwill, which is an accounting measure where the premium of purchased companies is carried as an asset, says Richard Wilson of EY.
EY wanted £35m of costs put back into profit and loss, Wilson said.
Goodwill was written down by more than £1bn this year. Could the auditors have been tougher on them, asks MP Rachel Reeves?
“With hindsight with information I didn’t have at the time… I think the answer has to be yes, with hindsight,” he says.