Deloitte fined record £15m over Autonomy audit

Big Four accountancy firm Deloitte has been fined a record £15m by the The Financial Reporting Council (FRC) following an investigation in relation to its audit of software company Autonomy Corporation. The FRC also revealed sanctions against the firm’s former partners, Richard Knights and Nigel Mercer and are in relation to the periods between January 2009 and June 2011. Along with the fine, Deloitte has been “severely reprimanded” and has agreed to provide a Root Cause Analysis of the reasons for the misconduct, 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 has been excluded from membership of the Institute of Chartered Accountants for England and Wales for five years and has been fined £500,000. Nigel Mercer has been fined £250,000 and received a severe reprimand. It comes after a tribunal found that Deloitte, Knights and “to a lesser extent” Mercer, were culpable of serious and serial failures in discharge of this public interest duty. The Tribunal made numerous findings of misconduct with Knights, and thus Deloitte, liable for failures to act with “integrity and objectivity”. Each of Deloitte, Knights and Mercer “failed to act with competence and due care and professional scepticism,” the FRC said. It revealed the misconduct arose from Deloitte’s audit and review work during 2009 and 2010 relating to the accounting and disclosure of Autonomy’s sales of hardware and of software licences to value added resellers (VARs). The Tribunal found that each of Deloitte, Knights and Mercer failed to exercise “adequate professional scepticism and to obtain sufficient appropriate audit evidence”. FRC added that Deloitte should not have issued “unqualified audit opinions” in these years based on the audit evidence obtained and fell “seriously short” of the standards to be expected of a reasonable auditor. Elizabeth Barrett, FRC executive counsel, 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. After lengthy, fully contested proceedings, the Tribunal concluded that the audit work fell significantly short of the standards expected of an audit firm and its partners.” She added: “The decision serves as an important reminder of the need for auditors to ensure that they conduct audits in compliance with these key audit and ethical requirements and of the consequences when they fail to do so.”

Deloitte fined record £15m over Autonomy audit

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