Questions mount for Deloitte over relationship with Autonomy

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 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 ($1.2m) described as non-audit fees.

Deloitte, who said that the share of non-audit work at Autonomy was declining, categorically denies knowledge of any impropriety and said it carried out its audit "in full compliance with regulation and professional standards".

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