EY Fined ₹51 Crore Over Audit Failures in Thomas Cook Collapse

Ernst & Young (EY) has been hit with a ₹51 crore penalty by the UK’s Financial Reporting Council (FRC) for serious shortcomings in its audits of travel group Thomas Cook, whose high-profile collapse in 2019 triggered a wide-reaching regulatory investigation.

The FRC’s findings pointed to major lapses in EY’s reviews of Thomas Cook’s financial statements for 2017 and 2018. According to the regulator, EY and lead audit partner Richard Wilson failed to exercise the necessary professional skepticism and did not sufficiently challenge management, weakening the integrity of the audits as the company faced mounting financial pressure.

Thomas Cook, burdened with ₹1.78 lakh crore in debt, ultimately folded in 2019 after 178 years of operations, leading to thousands of job losses and the repatriation of hundreds of thousands of travelers stranded across the globe.

The FRC highlighted key failings in EY’s assessment of the company’s “going concern” status and its evaluation of goodwill — which formed a significant part of Thomas Cook’s asset base. Auditors were also found to have overlooked potential threats to audit independence, particularly due to a close working relationship between a restructuring partner and the company’s CFO.

While the FRC clarified that these breaches were not deliberate, they were deemed severe enough to warrant substantial penalties. The original fine of ₹68.25 crore was reduced to ₹51 crore in recognition of EY’s cooperation and early admission of its audit failures. A separate personal fine imposed on Richard Wilson was also reduced for similar reasons. EY will also cover the cost of the FRC’s investigation.

In a statement, the firm said, “We deeply regret that the 2017 and 2018 audits of Thomas Cook fell below the standards we expect.” EY added that it has since taken steps to improve its audit processes, investing in advanced technology, reinforcing staff training, and promoting a stronger culture of professional skepticism.

The ruling adds to growing scrutiny over the role of big accounting firms in major corporate failures, raising questions about the effectiveness of current audit oversight frameworks.