Thomas Cook inquiry attacks Government go-slow on audit reform

Foot-dragging over audit reform needs to end or there will be more high profile corporate failures like those at Thomas Cook, Carillion and BHS, MPs have warned.

Ministers must set out an urgent timeframe for abolishing accounting watchdog the Financial Reporting Council (FRC) after a damning report two years ago found it was not fit for purpose, the House of Commons Business Select Committee said.

City grandee Sir John Kingman called for the FRC to be replaced in an independent study released in December 2018, comparing it to a “ramshackle house”.

But this has not yet happened despite bookkeepers repeatedly failing to spot problems at major companies.

Top travel agent Thomas Cook collapsed last September, stranding 150,000 British holidaymakers abroad and sparking a business committee inquiry which raised questions over the travel firm's accounting practices and why auditors signed its finances off.

Darren Jones, committee chairman, said: “Recent audit scandals highlight the need for the Government to tackle this issue as a matter of urgency.

“At a time when businesses are facing tough trading conditions and when their balance sheets are under significant pressure, it’s important investors and other stakeholders can have confidence in audits.

“While the Government has a series of priorities at the moment, given the importance of audit and the fact the department already has a raft of practical audit measures sitting on its desk gathering dust, we should expect the business department to show far more urgency.”

Sir John, a former civil servant and chairman of Legal & General, attacked ministers last December for allowing the FRC to “drift on half-reformed and lacking the teeth that only legislation can give it”.

The Government has said it is committed to audit reform.