FRC to investigate Autonomy's accounts

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The Financial Reporting Council has launched an investigation into the financial reporting of Autonomy

The FRC is to investigate reports for the period between 1 January 2009 and 30 June 2011.

UK software company Autonomy became the centre of an international accounting scandal in November, when the world’s biggest PC maker Hewlett Packard accused the former management of “accounting improprieties.”

HP said Autonomy appeared to have "inflated" the value of the company prior to the takeover as part of a "wilful effort to mislead", which led to a $5bn (£3.1bn) charge in its latest quarterly accounts.

It is a deal which has directly or indirectly involved all of the Big Four, with KPMG brought in to conduct diligence on Autonomy after Deloitte signed off its audit of the UK company in 2010. Later PwC was brought in to carry out the report into the takeover, while Ernst & Young audit HP.

The takeover is already the subject of an investigation by the Securities and Exchange Commission and the US’s Department of Justice.

In addition, HP is also being sued by shareholders claiming the computer company knowingly made misleading statements over the contentious Autonomy takeover.

The FRC says its decision to initiate an investigation was taken following consultation with ICAEW.

 

Helen Roxburgh

 

Related articles

Editor's view: HP, Autonomy and the auditors

HP accuses Autonomy of "accounting improprieties"

DoJ investigating Autonomy/HP deal

 

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  • Comment by Robert Thomson BSc(Econ) FCA

    Helene's account of events is clear,short and precise. I shall be glad to hear of the FRC's decision against Autonomy especially since the Institute has been consulted on the issue and Hewlett Packard would know the essentials of PC software valuations being a major player in the industry. Since computer software and valuations in uncertain and rapidly changing market both computer companies should be in a better position to arrive at provisions for valuations than professional firms of Chartered Accountants who generally have to rely on industry expertise. Yet the deal seems to have proceeded. £3 million is no petty cash !

  • Comment by Seif A. Somalya (membership no. 7178384)

    Sir, It seems there is one every such scandal every few months. This shows that External audit because of the scope limitation, cannot pre-empt nor detect such fraudulent behaviors. However there should be more stringent requirements for such companies to have internal audit manned by professionals. Their quarterly reports / statements filed with regulatory bodies must too bear signatures of Head of Internal Audit and should provide detailed unequivocal declaration on accuracy and truthfulness of these underlying figures and notes. Perhaps it is also time to review the partners' review process and fugure out where such loopholes or weaknesses exist. Such scandals undermine public confidence and trust on whole accounting profession. Also ICAEW must review the teaching materials for the students. More attention also should be paid on how to enhance certain professional values, esp. ethics and integrity for all, including those in public practices.