Accountancy firm fell 'significantly short' - UK regulator
Deloitte fell "significantly short of the standards" to be reasonably expected in its audit of Autonomy, the troubled business software maker that was bought by Hewlett-Packard seven years ago, according to Britain's accounting regulator.
Two auditors, Richard Knights and Nigel Mercer, were singled out for their alleged failure to adequately challenge Autonomy's accounting and disclosure of its purchases and sales of computer hardware, and its accounting for transactions with so-called value-added resellers, the Financial Reporting Council said in a statement yesterday. Former Autonomy chief financial officer Sushovan Hussain, who was convicted of fraud in the US, was also faulted by the regulator.
Autonomy, a software company that specialised in the sorting and analysis of big data sets for businesses, was sold to Hewlett-Packard in 2011 for $10.3bn (€8.8bn). A year later, HP wrote down $8.8bn of that, alleging that Autonomy inflated years' worth of its finances, triggering a major accounting investigation and legal battle.
The FRC referred the accounting firm, the auditors, Hussain and another former Autonomy official to an independent tribunal that can mete out disciplinary sanctions. The three-person panel will evaluate the FRC's recommendations and a proposed fine, which could reach into the millions.
PwC was fined £5.1m last year over its audit of RSM Tenon.
"Deloitte acknowledges today's announcement from the FRC and has fully cooperated with the investigation to date," the accounting firm aid in an emailed statement. "We are disappointed that these complaints have been brought and we will defend ourselves against them at tribunal." (Bloomberg)