Caveat emptor

The Serious Fraud Office and US department of justice have opened investigations into the accusations of suspect accounting at the British technology firm Automony before its 2011 acquisition by Hewlett-Packard.

In a regulatory filing with the US Securities and Exchange Commission (SEC), HP said it had been told that investigations were under way by the US and UK authorities on 21 November and 6 February respectively.

Ironically, the SFO is itself an Autonomy user – in order to work through voice calls and emails for relevant information.

HP announced last November that it was writing down the value of Autonomy by $8.8bn (£5.9bn), having bought it for more than $10bn in summer 2011.

Meg Whitman, the chief executive who took over as the acquisition was being completed, blamed a "wilful effort" to inflate the company's figures, and that they "severely impacted HP management's ability to fairly value Autonomy at the time of the deal".

The numbers are truly eye watering and begs the question that during the due diligence process how many Auditors examined the validity of the reported accounts?

This is not an isolated event, think of the Japanese camera giant Olympus, the company admitted to hiding losses on securities investments for decades.

To conduct this $1.7 billion fraud Olympus executives secretly liquidated hundreds of millions of dollars of Olympus investments,then lied to auditors by certifying that the investments still existed.

Ultimately the validity of a company’s accounts reflects the integrity of the company which is being audited.

If the company’s results are misrepresented through fraud, deviousness or sheer incompetence then the fall-out will be disastrous.