Britain's accounting watchdog announced Monday that it is investigating
the books of British business software maker Autonomy Corporation in the
period before it was bought by Hewlett-Packard Co. in 2011.
In a
brief statement, the Financial Reporting Council said it had launched an
investigation "into the published financial reporting of Autonomy for
the period between 1 January 2009 and 30 June 2011."
The council has the power to impose fines and other sanctions.
HP
bought Autonomy for $10 billion in 2011, but later alleged it had been
misled into paying a price 64 percent above the firm's market value. In
November, HP took an $8.8 billion write-down for the Autonomy
acquisition, with more than $5 billion of that due to alleged
"accounting improprieties."
It was one of several lossmaking purchases for HP, which has struggled to reinvent itself as sales shrink for PCs and printers.
Among
other things, Autonomy made search engines that help companies find
vital information stored across computer networks. Acquiring it was part
of an attempt by HP to strengthen its portfolio of high-value products
and services for corporations and government agencies.
Former Autonomy CEO Mike Lynch has denied HP's allegations.
In a statement, a representative of Autonomy's former management said they welcomed the investigation.
"As
a member of the FTSE 100, 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," it said.
"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."