Autonomy and Deloitte in accounting watchdog probe
By Michael Northcott Tuesday, 12 February 2013
Remember all the fanfare when HP acquired Autonomy? And then when it all started to look a bit sour? Well now, the UK's accountancy watchdog is probing the British firm and its auditor, Deloitte.
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The Financial Reporting Council today revealed that it is investigating Autonomy’s financial reports as well as the auditing work performed for the British software firm by Deloitte UK, before it was sold to Hewlett-Packard back in 2011.
The probe will look at Autonomy’s company accounts for the 28 months to June 2011, which was just three months before the $11bn HP deal was completed. Deloitte is also in the FRC’s sights as it was first brought in by Autonomy back in 2003.
The acquisition became controversial after HP announced it had been forced to write down $8.8bn of the value of the deal, before suggesting that the firm’s management might have been involved in accounting ‘improprieties’ before the sale. Even at the time, though, many asked how HP could have missed all this in its due diligence…
Still, Mike Lynch, the founder and former chief exec of Autonomy left HP at the start of last year, and has spent the intervening time flatly denying the accounting allegations and charging HP with mismanagement of the acquired firm.
As for Deloitte, the audit firm rolled out a statement denying allegations straightaway. It said: ‘As previously stated, Deloitte had no knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements. We conducted our audit work in full compliance with regulation and professional standards.’
The aggressive stance of HP – and the fact that they have managed to bend someone’s ear at the FRC – does raise questions. With industry pundits muttering about how the firm has lost its way in recent years, and a series of embarrassing U-turns about whether or not it still wants to produce PCs, there seems to be a lot of vacillating going on.
If the FRC finds nothing amiss, it will look like HP was way too quick to point the finger. But the regulator will be mindful of its own reputation, too, now it's involved in this dispute. So doubtless some worthy 'recommendations' will be forthcoming...