Crooked accountants at PwC, EY “complicit” in Thomas Cook collapse – FT

KPMG put the spotlight on the deep corruption that has infected the accounting industry, with its professionals involved in every major global money scandal you care to mention – from FIFA racketeering to state capture in South Africa. But Dodgy Accounting isn't only a game that KPMG auditors play. The latest corporate collapse demonstrates that KPMG rivals PwC and EY are of the same ilk. The Thomas Cook collapse, which cost thousands of jobs around the world and left many passengers stranded as their holidays evaporated into thin air, is the latest case to raise questions about the true worth of accountants in a modern economy. The Big Four have inveigled their way into commanding huge fees for watching over the books of big businesses. But, behind the facade of smart offices lies a seedy tale of highly educated, and greedy individuals cooking books to keep their paymasters, and themselves, happy at the expense of other stakeholders, including unsuspecting minority shareholders, service providers and employees. The FT puts the spotlight on the latest scandal involving accounting giants. – Jackie Cameron.By Thulasizwe Sithole.British Members of Parliament say accountants working for two of the world's biggest professional services firms are partly to blame for the collapse of travel group Thomas Cook..Thomas Cook, a global brand that appeared to be too big to fail, collapsed suddenly last month, leaving hundreds of thousands of people stranded. .The Financial Times reports that MPs have accused two of the UK's Big Four accounting groups of being "complicit" in the failure of Thomas Cook, slamming one, the travel group's former auditor PwC, over an alleged conflict of interest in its pay advice to executives. .___STEADY_PAYWALL___."EY, which audited Thomas Cook from 2017 until it went bust last month, and PwC, which checked its books between 2007 and 2016, were forced to defend their audits in a Commons business select committee hearing on Tuesday," says the pink paper.."MPs criticised the auditors for repeatedly signing off the company's accounts with a clean bill of health despite admitting they had raised significant risks to its financial stability with its board and had concerns over some of its accounting practices.".Rachel Reeves, who chairs the committee, is quoted as saying that PwC should have more aggressively challenged management on its allocation of large exceptional items. .She also reportedly said that EY had displayed "no learning" on the appropriate accounting treatment of large amounts of goodwill from the failure of Thomas Cook. .The failure of the travel group highlights – yet again – that legislation is needed to force a separation of the Big Four accountants, which also include Deloitte and KPMG, is the message in the FT. ."How many more company failures, how many more egregious examples of accounting do we need before your industry opens its eyes and recognises you're complicit in this and that you need to reform?" asked Reeves.."PwC was also challenged by MPs over a conflict of interest for advising bosses on their pay and bonuses while it was the company's auditor," reports the FT. .Hemione Hudson, head of audit at PwC, is quoted as saying that the firm would not take on the controversial dual role today "even if it were permitted by the rules" because of the "current climate", referring to the unprecedented scrutiny of audit firms in the wake of a string of corporate failures. .PwC earned £4m providing remuneration advice to Thomas Cook between 2007 and 2011, points out the FT.."Accountants have been banned from providing such advice to the companies they audit since 2016. In total, PwC was paid £21m by Thomas Cook for non-audit services during its tenure as auditor.".Thomas Cook's collapse has drawn attention to the way it reported historic one-off charges, as well as its treatment of goodwill and its heavy debts. Its accounts have been scrutinised for stripping out "exceptional items" totalling £1.8bn over eight years, which flattered its headline financial results, explains the FT.."Millions of pounds in bonuses paid to executives are also under the spotlight, as they were calculated in part from the underlying operating profit figure once exceptional items were removed. Thomas Cook has also been questioned for taking more than a decade to write down £1.1bn of goodwill from the acquisition of MyTravel in 2007. ."EY is being investigated by the Financial Reporting Council over its 2018 audit of Thomas Cook. The regulator said it would 'keep under close review' the scope of its investigation and the question of whether to open any further probes," adds the FT.

Crooked accountants at PwC, EY “complicit” in Thomas Cook collapse – FT

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