FRC to hear Deloitte Autonomy complaint in October

The Financial Reporting Council (FRC) has set the date next month for the hearing of a formal complaint against Deloitte and two of the firm’s audit engagement partners concerning Autonomy Corporation

The UK software firm has been mired in claims of accounting regularities following its sale to Hewlett-Packard in 2011.

The disciplinary tribunal will meet on Thursday 10 October to consider details of the complaint, which concerns the conduct of Deloitte and partners Richard Knights and Nigel Mercer in relation to the audit of the financial statements for Autonomy Corporation for the financial years ended 31 December 2009 and 2010.

The hearing will also consider the auditors’ review of the financial results for Autonomy Corporation for the periods ended 30 September 2009, 31 March 2010, 30 June 2010, 30 September 2010, 31 March 2011 and 30 June 2011.

It is alleged that the conduct of Deloitte, Knights and Mercer fell significantly short of the standards reasonably to be expected of a member or member firm of the ICAEW.

The regulator’s investigation, which began in 2013, relates to a hotly disputed disagreement over accounting practices at Autonomy, which was acquired by Hewlett-Packard (HP) for $11bn (£8.8bn) in 2011.

The US tech giant 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 FRC complaint alleges that Deloitte, 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 FRC’s Financial Reporting Review Panel (FRRP).

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 FRC originally also brought a second complaint against two former Autonomy finance executives, Sushovan Hussain and vice president of finance Stephen Chamberlain. The FRC has stayed its complaint against both men, pending their appeals against court decisions in the US where both have been facing criminal charges.

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