The UK’s Financial Reporting Council (FRC), which sets standards for accounting and auditing, is to review financial reporting at Autonomy following accusations by Hewlett-Packard (HP) that the UK technology firm hid “serious accounting improprieties” when it was acquired by HP in a US$11.1bn deal in October 2011.
The FRC has revealed that it is looking into Autonomy’s published results for the two-and-a-half year period up to 30 June 2011, shortly before the sale to HP was completed. HP wrote down $5bn late last year after the takeover failed to deliver the value the American firm was expecting.
The FRC did not reveal whether it was investigating Autonomy alone or the company’s then auditor, Deloitte, as well. But the FRC has confirmed its action follows discussions with the relevant professional body, the Institute of Chartered Accountants in England and Wales (ICAEW) and that autonomy’s founder and chief executive officer (CEO), Mike Lynch, had been informed of the investigation. Lynch left HP several months after the takeover and maintains that the group has mismanaged his former company since its takeover. The fall in the value of the company he attributes to bad management since the takeover and HP’s alienation of ex-senior managers.
Lynch issued a statement on behalf of the company’s former management in response to the FRC announcement, which read: “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.
“We welcome this investigation. Autonomy received unqualified audit reports throughout its life as a public company. This includes the period in question, during which Autonomy was audited by Deloitte. We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the FRC.”