Auditor's XL 'irregularity' warning

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In a strongly-worded resignation letter, accountancy firm KPMG claimed in October 2006 that it was blocked from investigating alleged misrepresentations by company directors that could have resulted in "material errors" in financial statements.

XL Leisure Group went into administration in the early hours of Friday morning leaving some 85,000 British holidaymakers stranded overseas.

Since then almost 12,000 people have been brought back as part of an airlift mission conducted by the aviation regulator.

The warning of potential financial irregularities at XL was made in a Companies House filed document dated October 16, 2006. In it KPMG explained why it had resigned as XL's auditor.

It stated: "We are no longer able to conclude that the financial statements give a true and fair view of the profit of the Company and its subsidiaries."

An investigation into arrangements between XL and a supplier concluded that information had been "misrepresented" to KPMG from "certain directors". As a result "financial statements were likely to contain material errors", auditors concluded.

But they were blocked from investigating the matter further, leading to the resignation.

XL, the UK's third largest tour operator, was forced to call in administrators, it was announced on Friday. The move grounded the firm's fleet of planes, necessitating the ongoing airlift mission to repatriate those left stranded

The Civil Aviation Authority (CAA) said it had brought back 11,900 people on 52 flights. The vast majority of those still overseas will fly back on the date they originally intended to, the aviation regulator added.