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British regulator to probe Autonomy's accounting before HP deal

February 11, 2013|By Chris O'Brien
  • Former Autonomy CEO Mike Lynch has denied Hewlett-Packard's allegation of accounting fraud by the British company.
Former Autonomy CEO Mike Lynch has denied Hewlett-Packard's allegation… (Chris Ratcliffe / Bloomberg )

A British regulatory agency said Monday it has launched a probe into the accounting practices of Autonomy covering the two years before it was acquired by Hewlett-Packard for $11 billion. 

The Financial Reporting Council revealed the probe on its website but provided few details. HP announced it was acquiring Autonomy in August 2011. In November 2012, HP said it had uncovered evidence of widespread accounting fraud at Autonomy and later confirmed that the U.S. Justice Department was investigating the company's allegation, which Autonomy's founder has denied.

HP has also turned over evidence to Britain's Serious Fraud Office, which has yet to confirm whether it has taken up the case. Unlike the Serious Fraud Office, the Financial Reporting Council, which oversees the work of the nation's accountants, cannot bring criminal charges. Should it find wrongdoing, it could eventually result in fines or bans levied against any accountants involved. 

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Mike Lynch, the former CEO and founder of Autonomy who was fired by HP last May, has waged a public campaign against the U.S. company, denying the allegations and calling on HP to release more details so he could address them.

In response to Monday's announcement, AutonomyAccounts.org, a site launched by Lynch, posted a statement saying "the accounts of Autonomy have previously been reviewed by the FRC, including during the period in question, and no actions or changes were recommended or required.

"We welcome this investigation. Autonomy received unqualified audit reports throughout its life as a public company. This includes the period in question, during which Autonomy was audited by Deloitte. We are fully confident in the financial reporting of the company and look forward to the opportunity to demonstrate this to the FRC."

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Follow me on Twitter @obrien.

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