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Deloitte fined £15mln after being found guilty of Autonomy audit misconduct

Autonomy,  once the star of the UK’s technology sector was acquired by Hewlett-Packard for US$11bn in 2011.

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Big four accountancy firm Deloitte has been sanctioned and fined £15mln for misconduct in the audits of software group Autonomy between 2009 and 2011.

Two of Deloitte’s former partners Richard Knights and Nigel Mercer were also fined and sanctioned by accountancy watchdog, the Financial Reporting Council.

An independent Disciplinary Tribunal found that Deloitte, Knights and Mercer were culpable of serious and serial failures in the discharge of their public interest duty. 

In addition to the fine, Deloitte has been ordered to pay £5.6mln for the cost of investigation and carry out an investigation into to why the firm's processes and controls did not prevent the misconduct and whether the firm’s current processes would lead to a different outcome.

Knights was also fined £500,000 and barred from the membership of the Institute of Chartered Accountants for five years, while Mercer was fined £250,000 and received a severe reprimand.
 
Elizabeth Barrett, Executive Counsel at the FRC, said: “The significant sanctions imposed by the independent Tribunal and announced today reflect the gravity and extent of the failings by Deloitte and two of its former partners in discharging their public interest duty concerning Autonomy’s Audits.  

"The identified failures to act with integrity, objectivity, scepticism and professional competence go to the heart of audit."  

Autonomy a fallen star

Autonomy, once the star of the UK’s technology sector, was acquired by Hewlett-Packard for US$11bn in 2011.

Problems started soon after the deal was completed with H-P accusing the company’s founder Mike Lynch and finance head Sushovan Hussain of grossly inflating the value of the business.

Just over a year after the takeover, H-P said it had discovered serious accounting improprieties that eventually led to an US$8.8bn write-off.

The US firm has sued Lynch to get the money back, with the UK businessman also facing criminal charges in the US.

A US court last year sentenced Hussain for five years for fraud in relation to the acquisition.

Lynch has always vehemently denied the allegations.

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