Autonomy auditor faces more questions over fees

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The Independent Online

Deloitte faced more questions over its relationship with the software firm at the eye of a storm over alleged "accounting improprieties" yesterday, as a shareholder adviser said it had repeatedly raised concerns over the fees racked up by the auditor for other work.

Pirc, which advises pension funds investing £1.5trn in total, said that Autonomy had "raised a number of red flags" regarding corporate governance.

Hewlett-Packard bought the Cambridge-based firm for $10.3bn (£6.5bn) last year, but the US giant wrote off $8.8bn on Tuesday, accusing its former management of inflating the value of the firm and a "wilful" effort to mislead.

Autonomy's founder Mike Lynch has denied all the allegations.

Alan MacDougall, the managing director of Pirc, said that Autonomy's board "lacked proper independent representation", adding: "Its auditor also raked in significant non-audit fees, which we found problematic".

Pirc said the sums Autonomy paid the accountancy firm for other services such as legislation, tax and corporate finance advice made up more than 25 per cent of the total the group paid Deloitte, a level the adviser considers significant in its assessment of whether an auditor is properly independent from its client.

Autonomy paid Deloitte $2.7m in 2010, with $1.5m described as total audit fees and the rest described as non-audit fees. Deloitte, which said the share of non-audit work at Autonomy was declining, categorically denies knowledge of any improprieties and said it carried out its audit "in full compliance with regulation and professional standards".

HP is facing questions over its due diligence on Autonomy because City analysts had been raising doubts for years before the 2011 acquisition.

Law firms are looking into staging class-action law suits in the US. At least three are "investigating possible claims against Hewlett-Packard".