Deloitte auditors and Autonomy finance team face FRC disciplinary tribunal

The Financial Reporting Council (FRC) has made formal complaints and is planning for a tribunal hearing against Deloitte and two of its audit engagement partners and the former chief financial officer and vice president of finance at software company Autonomy, which has faced allegations of accounting irregularities

The complaints follow an investigation by the FRC into Autonomy’s financial reporting between 1 January 2009 and 30 June 2011, following discrepancies over revenue recognition figures used in the acquisition of Autonomy by Hewlett-Packard (HP).

HP’s acquisition of Autonomy for $11bn in 2011 has become mired in controversy after the company wrote down $8.8bn the following year, of which $5bn related to alleged accounting irregularities and alleged misrepresentation of how software rental and acquisitions were shown.

The first complaint relates to the conduct of Autonomy’s auditors, Deloitte, and Richard Knights and Nigel Mercer, audit engagement partners at the firm. The complaint alleges that the firm, Knights and Mercer failed to adequately challenge Autonomy’s accounting and disclosure of its purchases and sales of computer hardware, its accounting for transactions with value added resellers and to correct false or misleading communications made by Autonomy to the Financial Reporting Review Panel.

Knights is also alleged to have breached the fundamental principle of integrity in that he failed to correct a misleading statement made by Sushovan Hussain, former CFO at Autonomy, to the FRRP in a meeting in January 2010 and failed to act with objectivity during the period October 2009 – July 2010.

The second complaint is against Hussain who is alleged to have acting dishonestly and/or recklessly when preparing and approving Autonomy’s annual report and accounts for the years ended 31 December 2009 and 31 December 2010, because of the accounting treatment of Autonomy’s purchases and sales of computer hardware and the inadequacy of their disclosure.

Autonomy’s former vice president of finance, Stephen Chamberlain, is also alleged to have acted dishonestly and/or recklessly, and failed to act with competence and due care when preparing Autonomy’s annual report and accounts for the years ended 31 December 2009 and 31 December 2010 by failing to correct the misleading statement made by Hussain to the Financial Reporting Review Panel.

A spokesperson for Deloitte UK, said: 'Deloitte acknowledges today’s announcement from the FRC and has fully cooperated with the investigation to date. We are disappointed that these complaints have been brought and we will defend ourselves against them at Tribunal.'

A date for a tribunal hearing will be announced in due course.

Report by Amy Austin

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