Disciplinary action in relation to Autonomy Corporation plc
31 May 2018
Following an investigation into Autonomy’s financial reporting between 1 January 2009 and 30 June 2011, the Executive Counsel of the Financial Reporting Council (FRC) has delivered formal complaints under the Accountancy Scheme in connection with the conduct of the auditors Deloitte LLP, Richard Knights and Nigel Mercer (Senior Statutory Auditors and Audit Engagement Partners), and the conduct of Sushovan Hussain (former Chief Financial Officer) and Stephen Chamberlain (former Vice President of Finance). Their conduct is alleged to have fallen significantly short of the standards reasonably to be expected of a member or member firm of the ICAEW.
Details of the complaints are:
Deloitte, Richard Knights and Nigel Mercer are alleged to have failed (i) adequately to challenge Autonomy’s accounting and disclosure of its purchases and sales of computer hardware, (ii) adequately to challenge Autonomy’s accounting for transactions with value added resellers (“VARs”) and (iii) to correct false or misleading communications made by Autonomy to the Financial Reporting Review Panel (“FRRP”) of the FRC. Richard Knights is also alleged to have breached the fundamental principle of integrity in that he recklessly failed to correct a misleading statement made by Sushovan Hussain to the FRRP in a meeting in January 2010 and failed to act with objectivity during the period October 2009 – July 2010.
Sushovan Hussain is alleged to have breached the fundamental principle of integrity by acting dishonestly and/or recklessly (i) when preparing and approving Autonomy’s Annual Report and Accounts for the years ended 31 December 2009 and 31 December 2010, because of the accounting treatment of Autonomy’s purchases and sales of computer hardware and the inadequacy of their disclosure, (ii) in relation to Autonomy’s accounting for transactions with VARs and (iii) by making false or misleading statements to the FRRP.
Stephen Chamberlain is alleged to have breached the fundamental principle of integrity by acting dishonestly and/or recklessly, and failed to act with competence and due care (i) when preparing Autonomy’s Annual Report and Accounts for the years ended 31 December 2009 and 31 December 2010, because of the accounting treatment of Autonomy’s purchases and sales of computer hardware and the inadequacy of their disclosure, (ii) in failing to provide information to Deloitte which he knew or should have known was relevant to their work, (iii) in relation to Autonomy’s accounting for a transaction with a VAR for the quarterly period ended 30 June 2011 and (iv) by failing to correct a misleading statement made by Sushovan Hussain to the FRRP.
The FRC’s investigation has been carried out contemporaneously with parallel criminal and civil investigations and litigation both in the UK and in the USA and involved assessing large quantities of evidence gathered from external parties in the USA as well as in the UK.
A date for a Tribunal hearing will be announced in due course.
Notes to editors:
1. The FRC’s mission is to promote transparency and integrity in business. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
2. The FRC is the independent, investigative and disciplinary body for accountants and actuaries in the UK dealing with cases which raise important issues affecting the public interest. In brief, the stages of the disciplinary process under the Accountancy Scheme are:
Decision to investigate
Decision whether to bring enforcement proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal
Determination and imposition of sanction and/or costs orders
Under the Accountancy Scheme the FRC can start a disciplinary investigation in one of two ways: (i) the professional bodies can refer cases to the FRC; and (ii) the FRC may decide of its own accord to investigate a matter. The Conduct Committee will consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.
The criteria are specified in paragraph 5(1) of the Accountancy Scheme. A Member or Member Firm shall be liable to investigation under this Scheme only where, in the opinion of the Conduct Committee the matter raises or appears to raise important issues affecting the public interest in the United Kingdom and there are reasonable grounds to suspect that there may have been Misconduct or it appears that the Member or Member Firm has failed to comply with any of his or its obligations under paragraphs 14(1) or 14(2) of the Scheme.
Investigations are conducted by Executive Counsel and the Enforcement division.
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