This is what happens when auditors get too close to their clients
E-mails included in the judgment reveal that Deloitte’s Autonomy team was aware there was a problem with their client’s desired approach to revenue and cost recognition
The UK arm of Deloitte got a record fine from Britain’s accounting watchdog in September. With the full judgment against the firm laid bare last week, you can see why. If there were ever proof that auditors can get too close to their clients, it’s the accounting giant’s handling of former UK technology darling Autonomy.
Deloitte wrongly gave a clean bill of health to Autonomy's accounts for 2009 and 2010. These financial statements misleadingly suggested revenue from shifting hardware came from software, while related costs were inappropriately classified as sales and marketing expenses, the UK’s Financial Reporting Council argued. That helped sustain the impression that Autonomy was a fast-growing, high-margin “pure software” business — a perception that was critical to its stock-market rating. The group was subsequently acquired by HP, which later took a jumbo impairment charge and alleged Autonomy had committed fraud...
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