A Timetric briefing service

HP shareholders sue directors, KPMG and Deloitte

28 November 2012 by IAB editorial

Hewlett-Packard's (HP) directors, and its auditors KPMG and Deloitte, are being sued by HP's shareholders over alleged misstatements related to the acquisition of UK software company Autonomy in 2011.

KPMG and Deloitte were both involved as advisor on the deal between HP and Autonomy worth $11.1bn.

The suit was filed at San Jose Federal Court in California seeking unspecified damages and corporate governance reforms based on claims of financial misstatements, breaches of fiduciary duties, waste of corporate assets, unjust enrichment and negligence.
The suit follows HP's announcement last week that, following an internal investigation by PwC, the company has discovered that Autonomy inflated its financial accounts before the sale.

HP said: "A serious number of accounting improprieties and misrepresentations" had led to HP having to write off $5bn from the acquisition.

In response to the suit KPMG said: "The claims made against KPMG are based on incorrect understandings about the firm's role in this matter and are without merit. KPMG was not engaged by HP to perform any audit work on this matter."

"The firm's only role was to provide a limited set of non-audit related services. KPMG did not audit or oversee the work being questioned regarding Deloitte's audit of Autonomy, nor did KPMG review Deloitte's work papers as part of this engagement. Within the narrow scope of non-audit tasks KPMG did perform, we can say with confidence that we acted responsibly and with integrity. Our professional obligations and client confidentiality agreements prevent us from speaking in any greater detail without HP's consent," the Big Four firm said.

Deloitte UK said last week that it was not engaged by either HP or Autonomy to provide any due diligence in relation to the acquisition.

The firm stated: "Deloitte UK was auditor to Autonomy at the time of its acquisition by HP. Deloitte's most recent audit opinion on Autonomy's financial statements was for the year ended 31 December 2010 and was signed in February 2011.
"Deloitte categorically denies that it had any knowledge of any accounting improprieties or misrepresentations in Autonomy's financial statements. We conducted our audit work in full compliance with regulation and professional standards. We are unable to discuss our audit work further due to client confidentiality. We will cooperate with the relevant authorities with any investigations into these allegations."