Now UK watchdog to scruntise Autonomy accounts

Inquiry follows Hewlett-Packard's allegations after $8bn write-off on purchase

The software company Autonomy is to be investigated by the UK's accountancy watchdog over its financial statements in the lead-up to its $11.1bn (£7.1bn) takeover by US giant Hewlett-Packard in 2011.

HP wrote off $8.8bn of the purchase price paid for Autonomy last November, of which it said $5bn was "linked to serious accounting improprieties, misrepresentation and disclosure failures".

The Financial Reporting Council (FRC) is investigating Autonomy's financial reports between January 2009 and June 2011 – audited by Deloitte – after consulting the Institute of Chartered Accountants. The US Department of Justice is already investigating the accounting claims and HP has also asked the Serious Fraud Office to look into the allegations.

Autonomy's former chief executive Mike Lynch, who denies the charges, founded the company in Cambridge in 1996. He personally made around £500m on the sale of the business, although many analysts said at the time that Hewlett-Packard had overpaid. He left the company in May last year.

Mr Lynch said: "The accounts of Autonomy have previously been reviewed by the FRC, including during the period in question, and no actions or changes were recommended or required. Autonomy received unqualified audit reports throughout its life as a public company. This includes the period in question, during which Autonomy was audited by Deloitte. We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the FRC."

The FRC can issue an unlimited fine if a disciplinary tribunal upholds a complaint. The biggest fine it has issued was £1.4m against PricewaterhouseCoopers over its auditing of the investment bank JP Morgan. The body could also as an extreme measure withdraw an accountant or auditor's licence to practice.

Deloitte said: "We will co-operate fully with the FRC's investigation … . 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."

Sources close to the financial services firm said it was unsurprising that the FRC was investigating.

HP stunned markets three months ago when it said an investigation prompted by a whistleblower had found what appeared to be a "wilful effort on behalf of certain former Autonomy employees" to inflate the value of the company, and "to mislead investors and potential buyers".

The US group, which is struggling against a backdrop of shrinking PC and printer sales, was attracted by Autonomy's high-margin software, which allows users to search "unstructured" data sources such as emails and videos, as well as a roster of blue-clip clients including multinational corporations and government agencies. Autonomy allegedly booked low-margin hardware sales as much higher-margin software licensing revenues, making the company potentially appear more valuable. HP is being sued by US investors over the deal.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing
The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower