Tui Travel Sacks KPMG for Blowing the Whistle on Accounting Error
Following the resignation of its finance director, Tui Travel was left with no choice but to part with its accounting firm KPMG after the blow-up of an erroneous accounting report in October 2010 that forced the travel agency’s UK division to write off £117 million of its shares.
Prior to the announcement of this accounting failure that led up to the restatement of its 2009 results, Tui Travel said in August 2010 that it found “small receivable balances” amounting to £29 million which it said were impossible to recover. Hard on the heels of the October disclosure, another £88 million of write-downs were attributed to accounting failure.
During the height of the disclosure of the accounting failure, Tui CEO Peter confirmed the validity of KPMG’s claims and added that the accounting firm has also “ manifested themselves into the issues” verified after thorough investigation. Tui’s board of directors then gave credit to KPMG for blowing the whistle on the accounting failure.
In a statutory letter explaining the reasons why its relationship with Tui Travel could no longer be resolved, KPMG said discussions with Tui directors resulted in a resolution to put an end to its service to the travel operator. The letter said that restatement of Tui’s 2009 accounts and the way the travel operator treated its financial statements have raised concerns over the future of its relationship with the company.
For the financial year ended September 30, 2010, KPMG has never given qualifying remarks to Tui’s accounts that it signed off so far which will be published on January 7 this year.
Tui merged with First Choice in 2007, after which two computer systems from both firms have been used separately for its retail division and tour operations. On a regular basis, customer bookings were registered in the two computer systems, but on occasions when customers were given discounts, computer system of the retail division was used to record bookings. It created discrepancies in the accounting of Tui Travel.
Appointment of Pricewaterhouse Coopers is being eyed for approval of Tui Travel board in February 2011.