Thomas Cook auditors deny possible conflict of interest

Major accountancy firm PwC earned £21 million providing consultancy work for Thomas Cook’s remuneration committee while also looking after the travel company’s accounts.

MPs probing Thomas Cook’s collapse heard that PwC received a further £4 million between 2007 and 2012 for auditing Thomas Cook’s accounts and advising on executive pay levels.

PwC head of audit Hermoine Hudson told MPs sitting on the Business, Energy and Industrial Strategy select committee that the audit and consultancy businesses were independent at the time, so there was no conflict of interest.

"I don’t believe that it impacted our audit quality," she said.
However, she admitted that new regulations that have been introduced restrict the additional services an auditor is able to offer to its clients.

She said: "I do understand how people are concerned about the conflicts of interest," but she added that PwC’s work in relation to Thomas Cook was ‘in accordance with the rules that were in place at the time’.

Select committee chair, Labour MP Rachel Reeves, said: "PwC’s behaviour has only changed because the rules changed, that was the only thing to actually change your behaviour.

"Only public pressure and changes in the law did that, which is why it is so imperative that we have got to actually change the laws on the consultancy side and the audit side."

Thomas Cook’s most recent auditor, EY, also faced criticism from MPs on the select committee, who said it was ‘inconceivable’ that accountants thought the travel company was a sustainable business in the year leading to its collapse.

EY audit partner Richard Wilson signed the company off as a going in March 2019, just six months before it collapsed.

This was on the condition its lenders agreed in writing to give it £300 million extra cash. However, former bosses told the select committee last week that they were unable to sell any of Thomas Cook’s assets, including its profitable airline, because that would have reduced its income to the point of insolvency.

Conservative MP Antoinette Sandbach asked Wilson: "How on earth, if that’s the position the company is in, can you call it a going concern?"

Labour MP Peter Kyle said it was ‘inconceivable ..that you with your experience thought that kind of future pointed towards a sustainable business’.

Wilson insisted Thomas Cook would have been a going concern if it had access to a new loan facility.

Former Thomas Cook CEOs Manny Fontenla-Novoa and Harriet Green will appear before the select committee tomorrow morning along with former CFO Bill Scott.