Beancounters blasted over Thomas Cook: Accountants accused of being 'complicit' in collapse while raking in millions in fees

Blue-chip accountancy firms have been accused of being 'complicit' in the collapse of Thomas Cook while raking in millions pounds in fees.

The extraordinary gravy train enjoyed by PwC and EY while they audited the doomed tour operator's accounts was laid bare in the Commons yesterday.

MPs heard the firms generated more than £23million from 'non-audit' work, on top of around £32million they were paid for actually vetting Thomas Cook's finances.

Gravy train: MPs heard accountancy firms generated more than £23m from 'non-audit' work, on top of around £32m they were paid for actually vetting Thomas Cook's finances

Gravy train: MPs heard accountancy firms generated more than £23m from 'non-audit' work, on top of around £32m they were paid for actually vetting Thomas Cook's finances

Members of the Business, Energy and Industrial Strategy committee lambasted them for failing to raise the alarm over the precarious state of Thomas Cook's finances.

They accused the companies of signing off accounts which painted a 'flattering' picture of the travel giant's financial health, by failing to write down the value of the company for years, and stripping out £1.8billion in 'exceptional items' from its headline profits.

Committee chairman Rachel Reeves warned more firms would collapse without tougher legislation to keep the industry in check.

She said: 'How many more egregious cases of accounting do we need? We've had BHS, we've had Carillion, we've had Patisserie Valerie and now we have Thomas Cook.

'How many more do we need before your industry opens its eyes and recognises that you're complicit in all of this?'

Rival swoops in on holidaymakers 

On The Beach is spending more on advertising after Thomas Cook's collapse.

In a trading update ahead of full-year results next month, the package holiday provider said its rival's downfall was an 'exciting' opportunity to win a bigger travel market share and that it has boosted its marketing budget. 

Although On The Beach is making hay now, it was initially stung by Thomas Cook's liquidation in late September as it had to rebook flights for around 225,000 people.

Analysts have predicted this will cost On The Beach up to £7million.

Around one in five shorthaul beach holidays booked online are done through On The Beach.

The committee heard more details of the lucrative relationship PwC and EY had with Thomas Cook.

PwC received around £21million in consultancy and advisory fees between 2007 and 2016 on top of £24.8million for auditing accounts. 

Hemione Hudson, PwC's head of audit said it had backed the controversial decision to link bonuses to an underlying profit figure which stripped out 'exceptional items'. 

These amounted to £1.8billion over eight years and meant that despite severe financial problems, directors were awarded around £20million in bonuses in five years.

Reeves said it created 'conflicts of interest' for an auditor to provide this type of advice. Hudson said PwC would stop doing extra work for big companies it audits.

But Reeves said this was only because PwC was 'implicated in the collapse of Carillion', as it had acted as the construction giant's pension consultant. Reeves said: 'The industry never is proactive, it always waits for legislation rather than doing the right thing.'

EY said it generated around £2.4million in 'non-audit' fees but stressed that this was for work auditors were required to carry out, such as vetting documents ahead of a bond issue at the end of 2017.

 

Beancounters accused of being 'complicit' in Thomas Cook's collapse 

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