MPs have severely criticised senior audit professionals from PwC and EY over their level of challenge to management’s going concern statements as part of an investigation into the collapse of Thomas Cook, as well as highlighting strong objections to the provision of non-audit services to audit clients, says Accountancy Daily.
Both firms faced questions from the Business, Energy and Industrial Strategy (BEIS) Select Committee about their auditing of the travel firm, with one MP suggesting the presentation of the company’s financial position ‘defied common sense’ given the risks its business faced.
Hemione Hudson, PwC’s head of audit, told the committee that PwC had highlighted in considerable detail its challenges to the board in every one of the years the audit firm audited Thomas Cook, from 2007 to 2016. In particular, the accounts and annual report signing were delayed in 2011 because the firm required additional evidence about its financial position.
However, Hudson and audit partner Paul Cragg faced a grilling over the presentation of a number of separately disclosed items, which led to a £35m adjustment. There was also a barrage of questions to EY audit partner Richard Wilson, who took over the Thomas Cook audit in 2018, about the timing of the writing down of £1.1bn of goodwill.
Wilson explained that the going concern considerations involved assessing whether or not Thomas Cook still had the support of its lenders. While there was clear evidence of this in December 2017 and in 2018 when a new bond was agreed and new credit facilities, by March 2019 the tests of the bank covenant were ‘very tight’. Read more on Accounting Weekly.