Autonomy management hits back at HP

The war of words over Autonomy's accounts escalated on Tuesday, after the British company's former management hit back at fraud allegations from HP, its US purchaser and claimed that the new owner had restated Autonomy's earnings in a move to minimise "UK tax obligations".

In a strongly worded statement on the website of Mike Lynch, Autonomy's former chief executive, the group's management team at the time of HP's 2011 takeover said any allegation of misrepresentation, fraud or accounting impropriety was "completely false".

Tuesday's denial came after HP restated the 2010 financial accounts of a major division of the British software maker. The US technology company said a new audit had found "extensive errors". The restatement provided greater detail on HP's claim that Autonomy boosted its revenues and profits ahead of the $11bn sale of the business.

HP's restated figures for the division, Autonomy Systems, which were filed at Companies House in the UK, said revenue was less than half the previously reported total, and operating profits were 81 per cent lower.

"The substantial work necessary to prepare these accounts has revealed extensive accounting errors and misrepresentations in the previously issued 2010 audited financial statements, including the exact problems previously identified by HP," the US group said in a statement on Monday.

However, on Tuesday, the former senior management team of Autonomy said the restated figures contained no new material information.

"All that they reflect are differences in accounting treatment between the policies used by Hewlett-Packard and the international accounting rules that Autonomy used as an independent company," the management's statement said.

"A close reading of these accounts shows that the changes in Autonomy Systems sales were mainly a matter of deferred timing under the new HP accounting policies, deferring revenue out of 2010 and into future years. HP's intimation that this revenue has in some way disappeared is false."

The former Autonomy management added that it "appears that HP's restatement of Autonomy Systems' accounts may have more to do with minimising the company's UK tax obligations".

Autonomy, the management said, did not resort to "any exotic accounting treatments in order to avoid paying tax".

In response to the suggestion that it aimed to lower its UK tax bill, HP said: "The transfer pricing reductions are due to the same problems we have identified elsewhere, errors found in the overseas subsidiaries that resulted in reduced revenue, particularly in the US subsidiary. As a result, it became necessary to reduce the revenue transferred to the UK."

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The original accounts were audited by Deloitte, which on Tuesday defended its position, saying that it was not aware of any accountancy irregularities.

A Deloitte spokesperson said: "As previously stated, Deloitte categorically denies that it had any knowledge of any accounting improprieties or misrepresentations in Autonomy's financial statements."

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