The fall out arising from Hewlett Packard’s disastrous £7.10 billion acquisition of Autonomy gathers pace. HP is now set to sue the accounting firm Deloitte on the basis of flawed accounts for 2 years prior to the takeover.
HP claims that there was a widespread fraud which saw them suffer a £3 billion loss. In this instance the numbers are huge and allegations of criminality.
However in respect of company’s audits there are many instances of conflict of interest such as taking on consultancy work for clients and becoming too cosy with management teams.
It is all too easy for companies to bully the young staffers sent in to do the grunt work.
For example what chance has a newly appointed auditor walking around a factory warehouse to adequate value stock? In reality they have to rely on the company for “valuations” and this can result in a totally inaccurate picture being presented.
The
validity of a company’s accounts reflects the integrity of the company which is
being audited.
As
was demonstrated with the banking crisis in Spain an unrealistic valuation of
the property portfolio either through deviousness or sheer incompetence will
ultimately have disastrous consequences.
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