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21 Nov 2012 03:46pm

KPMG carried out Autonomy due diligence for HP

Deloitte was not engaged to provide due diligence in the acquisition of Autonomy by Hewlett-Packard

The firm has said today that it “categorically denies that it had any knowledge of any accounting improprieties or misrepresentations in Autonomy’s financial statements.” The statement follows HP’s accusations yesterday of “accounting improprieties” by former management.

Big Four rival KPMG was brought in by HP prior to the takeover to conduct due diligence on Autonomy, after Deloitte completed its 2010 audit of the UK software company, signed off in February 2011.

Yesterday HP, which is audited by Ernst and Young, said Autonomy had "inflated" the value of the company prior to the takeover as part of a "willful effort to mislead".

This led to a write-off of more than $5bn (£3.1bn) in its latest quarterly accounts. The accusations were made following an investigation carried out by PwC.

A spokesperson for Deloitte UK said today, “We conducted our audit work in full compliance with regulation and professional standards. We are unable to discuss our audit work further due to client confidentiality. We will cooperate with the relevant authorities with any investigations into these allegations,” it added.

KPMG and PwC both declined to comment due to client confidentiality.

In a conference call to analysts yesterday, HP CEO Meg Whitman said that the HP board relied heavily on the financial data audited by Deloitte.

Autonomy was sold to HP for $12bn in October last year.

HP has referred the case to UK and US authorities after former members of Autonomy’s management team “used accounting improprieties, misrepresentations and disclosure failures” to inflate the value prior to HP’s take over in 2011.

HP’s statement added that the actions of former staff “appear to have been a wilful effort to mislead investors and potential buyers, and severely impacted HP managements’ ability to fairly value Autonomy at the time of the deal.”

The company said as well as referring the matter to the regulatory authorities it would be taking civil court action against "various parties" to recoup money for its shareholders.

Irish-born Mike Lynch, founder of Autonomy, left HP in May 2012. He has rejected the claims, telling the BBC the figures are "just mad."

"Things would have to have gone pretty badly wrong to justify writing $8.8bn,” he said. 'It is utterly untrue. We reject this as utterly untrue. Everything we did we gave correctly to the auditors and was correctly noted by the auditors.”

"I don't understand how you can write-down this amount and say somehow this was all caused by something you didn't notice when you did due diligence with 300 people. It would have been kind of a big elephant to miss."

 

Raymond Doherty

 

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