U.K. Watchdog Finds Deloitte, Former Companions Failed to Problem Autonomy’s Accounting

The Monetary Reporting Council, the U.K.’s accounting watchdog, on Wednesday said Deloitte LLP and two previous associates have been “culpable of severe and serial failures” in their audits of Autonomy Corp., wrapping up a yearslong investigation immediately after results of misconduct.

Autonomy, an organization software business enterprise established in Cambridge, England, was acquired by
Hewlett-Packard Co.
in 2011 for $11.1 billion. A 12 months later, the U.S. organization took an $8.8 billion publish-down linked to the transaction, stating it was duped into overpaying mainly because of what appeared to be willfully inflated money statements. The bulk of Autonomy’s small business was later offered to British software program small business
Micro Target International
PLC.

On Wednesday, the FRC stated in a 268-web page report that Deloitte, Autonomy’s auditor, unsuccessful to obstacle its client on its accounting for particular components gross sales and other transactions disclosed in monetary stories involving January 2009 and June 2011. Deloitte is a sponsor of CFO Journal.

The accounting agency and its previous partners Richard Knights and
Nigel Mercer
did not address Autonomy’s statements with the needed experienced skepticism, the report by a disciplinary tribunal discovered.

“The pressure on Autonomy to meet up with market place expectations gave rise to a danger of misstatement by way of manipulation of the economic results to achieve a desired posture,” the FRC explained. Deloitte and its previous companions ended up mindful of the strain and the risk, the FRC said.

Deloitte and
Messrs. Knights
and Mercer failed to fulfill their obligation to look at the trustworthiness of Autonomy’s economic reporting, in accordance to the report, which also noted that Autonomy was listed in the FTSE 100 at the time, the country’s index of its biggest publicly traded firms.

“Autonomy was an important customer for Deloitte frequently, and for the Cambridge workplace in unique. It was the only FTSE 100 company audited from that business office,” the FRC reported.

In September, the FRC fined Deloitte £15 million ($19.5 million) and sanctioned Messrs. Knights and Mercer in relation to the Autonomy audits.

On Wednesday, the two former partners reported they disagreed with the report’s conclusions, introducing that “at all instances, we believe that we acted skillfully, diligently and in very good faith.”

Deloitte mentioned its audit tactics have advanced in latest many years and that it proceeds to commit in firmwide controls, engineering and processes.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

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