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Tuesday , October 27 2020

The former partner of U.K. Accounting Watchdog, Deloitte, has been fined over autonomy audits

Deloitte has been fined £15 million ($19.5 million) and two former partners has been sanctioned over past audits of British SoftWare Company Autonomy Corporation PLC by U.K. accounting Watchdog. The Financial Reporting Council said the former partners Richard Knights and Nigel Mercer and Deloitte were sanctioned based on a disciplinary tribunal found misconduct which is related to autonomy audits between January 2009 and June 2011.

The FRC tribunal discovered that Deloitte, Mr. Knights and to a lesser extent Mr. Mercer were blameworthy of serious and serial failures. Mr. Mercer was fined £250,000 and received a serious reprimand and Mr. Knights was fined £500,000 and excluded from membership of the Institute of Chartered Accountants for England and Wales for five years, the accounting watchdog said. The FRC stated that Deloitte has agreed to provide a root-cause analysis of the reasons for the misconduct after been seriously reprimanded.

Hewlett-Packard bought Autonomy in 2011 for $11.1 billion. The U.S. company after a year said it was duped into overpaying because of what it said appeared to be willfully inflated financial statements, so it took a write-down related to the deal. The bulk of Autonomy was later acquired by U.K. software group Micro Focus International PLC.

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Deloitte said it regrets that the FRC ruled that aspects of its audit work on Autonomy didn’t meet professional standards, and that it remains committed to deliver change that restores trust in the profession. Deloitte “Our audit practices and processes have evolved significantly since this work was performed over a decade ago and we continue to transform our audit by investing in firm wide controls, technology and processes,”. The tribunal discovered shortcomings in relation to Autonomy’s audits and certain of its sales FRC said. The FRC also stated that Mr. Knights was also found guilty of some other misconduct for a loss of his objectivity.

On Thursday Knight and Mercer said in a statement “We are disappointed that the Tribunal has criticised our conduct and certain judgments we made in 2009 to 2011. At all times we believe we acted professionally, diligently and in good faith and we disagree with the findings,”. Deloitte was also ordered by FRC to pay all cost of the investigation claimed by its executive council summing up to £5.6 Million with the tribunal costs.

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