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FRC: Disciplinary action for Deloitte

The Financial Reporting Council (FRC) are taking Deloitte and two of its former partners, Richard Knights and Nigel Mercer, to a Tribunal.

The tribunal will cover Knights and Mercer’s conduct when working with UK software company Autonomy Corporation. 

Conduct was ‘alleged to have fallen significantly short of the standards reasonably to be expected of a member or member firm of the ICAEW’.

Autonomy Corporation’s chief financial officer Sushovan Hussain was convicted earlier this month in San Francisco of fraud for allegedly making false statements to investors to inflate Autonomy’s performance prior to its sale to Hewlett-Packard in 2011.

In a statement by the FRC, Deloitte, Knights and Mercer are alleged to have failed in adequately challenging Autonomy’s accounting and disclosures of its purchases and sales of computer hardware. The pair failed to correct false or misleading communications made by Autonomy to the Financial Reporting Review Panel (FRRP) of the FRC, it alleges.

Additionally, the FRC has said that Knights is alleged to have ‘breached the fundamental principle of integrity in that he recklessly failed to correct a misleading statement made by Sushovan Husain to the FRRP’. Knights is also suspected to have acted without objectivity during the period of October 2009 – July 2010.

A spokesperson for Deloitte UK responded: “Deloitte acknowledges today’s [31 May 2018] announcement from the FRC and has fully cooperated with the investigation to date. We are disappointed that these complaints have been brought and we will defend ourselves against them at Tribunal.”

Hussain and former vice president of finance Stephen Chamberlain have also had complaints lodged by the FRC and have been called to the tribunal hearing.

The FRC has said that Hussain and Chamberlain are alleged to have breached the fundamental principle of integrity and failed to act with competence and due care.

The FRC has said that its 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 the tribunal is yet to be set.

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