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Thomas Cook’s Accountancy Practice’s Flying Under the Radar

It was reported last week that the Chair of the UK Government’s Business, Energy and Industrial Strategy (BEIS) committee has accused the accounting industry of being somewhat complicit in the recent collapse of Thomas Cook. 

Calling for even greater reforms and regulation in the industry, MPs had senior figures from Thomas Cook auditors PrIcewaterhouseCoopers and EY under the microscope, looking for potential conflicts of interests with other services that they had offered the company whilst acting as auditors for the firm.

The issue at hand, MPs believe, is that auditors should only be allowed to well, actually audit firms, and not actually provide any other services, such as consultancy and non-auditory financial advising, to avoid any conflicts of interest. Ironically, one of the non-auditing projects that PwC worked with Thomas Cook on was setting and awarding executive pay – something that many of the 9,000 disgruntled and now redundant employees will doubtless be delighted to hear about, especially considering that many of those who have lost their jobs are complaining openly about how there has been scant support for them, no established emergency hardship fund, counselling or emotional advice given.

During the questioning, one MP rightfully pointed out that the positive presentation of the company’s financial position, especially considering the millions in debt it was during the last 12 months before its’ collapse ‘defied common sense,’ when it was still being presented as a going concern with ‘substantial goodwill’, despite the fact that there was, by then, nothing left in the company’s assets, to reduce its debts without becoming insolvent.

If that wasn’t enough, to further muddy the waters, the PwC audit team also received shares in the PwC profits of the teams who were consulting on the other areas of the Thomas Cook business. With shares and bonuses dependent on raising revenue and getting results could it possibly mean that it may have been easy to run a blind eye to some of the more, erm, creative advice that they presented to Thomas Cook?

While the accounting forms in question defended themselves by agreeing that morals and transparency (not to mention newer stricter rules) would mean that they would never put themselves in such a position in future, that they had, they argued, in fact, not done anything wrong. It was in fact the fault of the system that people are unhappy. They allege that it was simply the lack of transparency which meant that it could be perceivedthat they had possibly behaved less-than-ethically. Not that they actually hadbehaved unethically, of course. 

And you thought running your business was tough. 

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