FRC to investigate Autonomy accounts

The Financial Reporting Council (FRC) has launched an investigation under the Accountancy Scheme into the published financial reporting of Autonomy for the period between 1 January 2009 and 30 June 2011, following discrepancies over revenue recognition figures used in the acquisition of Autonomy by Hewlett-Packard.

The FRC's decision to initiate an investigation was taken following consultation with the ICAEW.

Mike Lynch, former CEO of Autonomy, has defended Autonomy's accounting and a spokesperson for the former management of Autonomy issued the following statement: 'As a member of the FTSE 100 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', conducted by incumbent auditor Deloitte UK.'We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the FRC,' the spokesperson added.When the accounting issue first arose last November, Meg Whitman, HP's chief executive said the company relied on audits carried out by Deloitte UK of Autonomy when making its decision to pay $11.1bn (£6.94bn) for Autonomy. She said the company also relied on KPMG's audits of Deloitte's work.

Last November, the increasingly acrimonious spat over Hewlett-Packard's acquisition of Autonomy stepped up a gear after an HP shareholder filed a lawsuit citing Big Four audit firms KPMG and Deloitte, claiming they failed to spot serious issues in Autonomy's accounts.

In the US, the lawsuit, filed by Philip Ricciardi, an HP shareholder since 2007, named as defendants Whitman, HP CFO Catherine Lesjak, and former HP CEO Leo Apotheker.

The US lawsuit claims their inadequate due diligence had caused billions of dollars of harm to HP and made it overpay for Autonomy.

FRC disciplinary complaints filed following an investigation are heard by an independent Tribunal which will normally sit in public. If the Tribunal upholds a complaint, there is a wide range of sanctions which it can impose including an unlimited fine, exclusion from membership of a professional body covered by one of the Schemes and withdrawal of practising certificates or licences.

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