UK watchdog fines EY over Thomas Cook audits

LONDON - British watchdog the Financial Reporting Council said on Thursday it had fined the 'big four' accountancy firm EY 4.9 million pounds ($6.3 million) for "significant breaches" of standards on audits of Thomas Cook prior to its collapse in 2019.

EY and partner Richard Wilson had admitted serious breaches when assessing the travel company's financial statements for the financial years 2017 and 2018, the watchdog said in a statement.

Thomas Cook, the world's oldest travel firm, collapsed in 2019 after it failed to finalise a restructuring plan, stranding more than 100,000 passengers overseas and leaving many without jobs. Chinese company Fosun later acquired the company's brand, before selling it to Polish travel platform eSky Group last year.

EY was given a financial sanction of 6.5 million pounds, which was discounted by 25% as it admitted failings. Partner Richard Wilson was fined 140,000 pounds, discounted to 105,000 for the same reason.

The breaches related to assessing Thomas Cook's goodwill impairment level and going concern status, as well as adequately considering the risk to EY's independence during the 2018 audit, the FRC said.

"EY and Mr Wilson's failure to challenge robustly and to apply sufficient professional scepticism in these crucial areas led to significant breaches of auditing standards in both audit year," said Claudia Mortimore, FRC deputy executive counsel.

"The failings in 2018 are particularly serious given Thomas Cook's financial position."

($1 = 0.7781 pounds)

(Reporting by Shashwat Awasthi in Bengaluru and Iain Withers in London, Editing by Louise Heavens)