TT. Tui Travel

Shareholders in U.K.-based travel company TUI Travel PLC (TT.LN) should vote against the reinstatement of auditor PricewaterhouseCoopers LLP at the company's annual general meeting because of the accountancy firm's involvement in previous reporting inaccuracies, U.K. investor advisory group PIRC said Tuesday.

PIRC said PWC had proposed replacing KPMG Audit as TUI Travel's auditor after KPMG decided not to seek re-election following the discovery of reporting inaccuracies at TUI Travel. However, the advisory group said shareholders should oppose the appointment because PWC was the incumbent auditor when "fundamental flaws in internal controls" led to reporting inaccuracies.

The comments come as the impact of the reporting problems at TUI Travel rumble on. Explaining its decision to stand down as auditor, KPMG in December said that its relationship with some of TUI Travel's directors had become increasingly strained because of the affair.

The chief financial officer of Europe's largest travel operator, Paul Bowtell, resigned in October last year after the accounting error forced the company to write off GBP88 million in "irrecoverable balances" and restate its earnings for fiscal 2009.

In an embarrassing admission, the company said an ongoing audit for the fiscal year ended September 2010 had highlighted the accounting error in the integration of IT systems in its U.K. mainstream business that had accrued over a period of four to five years.

The company blamed a discrepancy between two IT systems used by its U.K. operations, one for retail and another for tour operators. The retail system documents prices at which holidays are sold and includes discounts and any free items that agents may offer, while the tour-operator system doesn't take discounts into account. The discrepancy was spotted only last year after the economic downturn meant the company was forced to offer more concessions.

The two systems were inherited through the merger in 2007 of First Choice Holidays PLC of the U.K. with the tourism operations of Germany's TUI AG (TUI1.XE) that created TUI Travel.

TUI Travel has said it is satisfied that weaknesses in the system had been rectified.

TUI Travel's AGM is scheduled to take place Feb. 3.

-By Steve McGrath, Dow Jones Newswires; 44-20-7842-9284; steve.mcgrath@dowjones.com

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