LITTLE ROCK — Autonomy Corp.’s financial reporting in the years leading up to its acquisition by Hewlett-Packard Co. is being investigated by the U.K. accounting regulator.
The Financial Reporting Council is investigating the published accounts of Autonomy for the period between January 2009 and June 2011, the London-based agency said in a statement Monday.
Hewlett-Packard, which took an $8.8 billion write down a year after acquiring Autonomy, on Nov. 20 accused the company of miscategorizing sales and financial misreporting.
Hewlett-Packard said Autonomy booked hardware sales to appear as more profitable software and used transactions with resellers of its software to accelerate revenue recognition or fabricate sales.
Former Autonomy executives, including ex-Chief Executive Officer Mike Lynch, have denied improper accounting and said Monday that they “look forward” to the investigation. Deloitte LLC said in November that it didn’t find evidence of misrepresentations or improper accounting when it last audited Autonomy’s finances for the year ended Dec. 31, 2010.
“Autonomy received unqualified audit reports throughout its life as a public company,” a spokesman for Autonomy’s former management said in a statement. “This includes the period in question during which Autonomy was audited by Deloitte.”
Deloitte said it wasn’t hired to carry out due diligence on the Hewlett-Packard acquisition.
“We intend to cooperate fully with the [Financial Reporting Council’s] investigation into these matters,” Deloitte said in a statement Monday. “We conducted our audit work in full compliance with regulation and professional standards.”
The council will next decide whether to bring disciplinary proceedings against anyone responsible for accounting errors and the matter may ultimately be referred to a tribunal. Sanctions from the regulator can include reprimands, fines and orders to withdraw accounting firms’ licenses, according to its website.
Hewlett-Packard has also given its evidence to the U.S. Securities and Exchange Commission and the U.K. Serious Fraud Office.
A spokesman for the company and Serious Fraud Office spokesman David Jones declined to immediately comment on the council’s inquiry.
Former Hewlett-Packard Chief Executive Officer Leo Apotheker, who bought Autonomy to diversify away from hardware and expand in software for businesses, left in 2011 after less than a year on the job after repeated strategy shifts and forecast cuts.
Meg Whitman, who took over from him, said the misrepresentations caused Hewlett-Packard to value Autonomy incorrectly before the deal, which ultimately cost the company, based in Palo Alto, Calif., $11.1 billion.
Business, Pages 23 on 02/12/2013