TUI saga continues: PwC reinstatement 'unacceptable'by
Investor advisory group PIRC has urged shareholders in TUI Travel to vote against the reinstatement of auditor PwC at the company's AGM on 3 February.
In the latest twist of the TUI Travel saga, PIRC is opposing the appointment of PwC because it was the incumbent auditor when "fundamental flaws in internal controls" led to the discovery by KPMG of reporting inaccuracies.
In a circular to shareholders, PIRC said: “The company is now seeking to reinstate PwC as auditor of the continuing entity which we regard as unacceptable."
The Association of British Insurers (ABI) also raised concerns about TUI's treatment of KPMG by issuing a scathing "red-top" governance warning.
In spite of the shareholder rebellion that is now expected next week, TUI Group’s 54% shareholding ensures the vote on the appointment of PwC will be passed.
TUI Travel’s most recent auditor, KPMG, decided not to seek re-election as the full extent of the reporting problems unfolded that had allegedly taken place under PwC’s watch.
KPMG blew the whistle on the accounting error in October last year; by December its relationship with some of TUI’s directors had become increasingly strained at which point it decided to part ways.
KPMG’s resignation letter stated: “the major part of the restatement is attributable to failures in the systems and controls of the group’s UK tour operator business over an extended period of time” and that the unmatched credits were the result of “inappropriate analysis, judgements and accounting processes undertaken by the directors”.
The discovery of the erroneous accounting report forced the travel agency’s UK division to write off £117 million of its shares.
The accounting error saw TUI's finance director Paul Bowtell resign his post, and earlier this month the travel firm’s turmoil was compounded with the resignation of board members Jeremy Hicks and Giles Thorley, in what many suggested was a sign of their discontent with KPMG’s resignation.
TUI said that it has started the process of identifying potential new non-executive directors.