Deloitte faces £15million fine over Autonomy
DELOITTE is facing a record £15m fine over its ‘reckless’ audits of a British software group before it was sold in a blockbuster deal.
The Big Four accountant, along with former partners richard Knights and nigel Mercer, has been accused by regulators of ‘serious failings’ that allowed autonomy to make misleading claims in its balance sheet.
auditors at Deloitte were too cosy with the company’s bosses and helped to ‘disguise’ £118m of loss-making hardware sales, the Financial reporting Council (FrC) alleges.
Soon afterwards, autonomy was sold to hewlett Packard for £9bn – but hP wrote off most of the company’s value and claimed the firm’s revenues and profits had been artificially inflated. Former boss Mike Lynch
(pictured), who is worth an estimated £469m, and other executives went on to make a fortune from the company’s sale to hP. But that deal and the questions over its accounts are now at the centre of high Court battle, which is thought to be the UK’s biggest ever fraud trial. Lynch, 55, faces separate criminal charges in the US and is fighting an extradition request.
rebecca Sabben-Clare, the FrC’s lead counsel in its probe of autonomy, urged a tribunal panel yesterday to fine Deloitte £15m for its alleged failings.
That would be a record, dwarfing the £10m PwC was fined in 2018 over its botched audits of collapsed retailer BhS.
But Sabben-Clare claimed the autonomy case was even worse than the BhS one: ‘The failings are of a similar level of seriousness – but the present case is more serious still. Deloitte knew full well that there was great market interest in the very figures to which their misconduct related.’ She added that although the findings against Knights and Mercer were ‘very serious’, the failures were ‘emphatically not a single rotten-apple case’. ‘The findings were ones involving lack of care and competence by the whole of the audit team,’ she said.
Deloitte said: ‘We acknowledge the seriousness of the findings of the FrC Tribunal. Deloitte is committed to the highest professional standards in everything it does and our audit practices and procedures have evolved significantly since this work was performed over a decade ago.’
The FrC tribunal is scheduled to continue tomorrow.
at the centre of autonomy’s case is how the firm classified loss-making hardware sales and reseller contracts, which the company said were part of its marketing costs. But a six-year investigation by the FrC said it had given a misleading impression of rising revenues from software sales and accused Deloitte, Knights and Mercer of ‘extremely serious’ failings in audits from 2009 to 2011.