EY has been fined £4.9m by the Financial Reporting Council (FRC) in relation to its audits of Thomas Cook before the travel company’s collapse in 2019.

Audit engagement partner, Richard Wilson, also admitted breaches of standards alongside EY relating to the “goodwill impairment” and “going concern” sections of Thomas Cook’s financial statements. Wilson has been fined £105,000 for his part in the audits.

The FRC, which is responsible for regulating auditors, accountants and actuaries, said that Thomas Cook’s audits for the financial years to 30 September 2017 and 30 September 2018 both failed to obtain reasonable assurance that the financial statements were free from material misstatement.

Following the FRC’s investigation, it said the sanctions imposed on EY had taken account of several factors, including the seriousness of the breaches and the financial strength of the auditor, as indicated by the turnover of the firm.

Deputy executive counsel at the FRC, Claudia Mortimore, said: “Thomas Cook’s goodwill balance and going concern status were fundamental to its financial position and performance. EY and Mr Wilson were subject to a public interest duty to comply with auditing standards and robustly challenge the forecasts and assumptions that underpinned Thomas Cook’s valuation of goodwill.

“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 years.

“The failings in 2018 are particularly serious given Thomas Cook’s financial position and the heightened risks surrounding the audit work. EY’s remedial measures together with the programme of non-financial sanctions are designed to prevent such failures being repeated.”

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