This month’s accounting train wreck involves an $8 billion writeoff at HP

If you enjoy watching train wrecks while the freight cars are still airborne and the engine is still sliding down the track sideways, you really have to quickly check out HP’s investment in Autonomy.  You can watch it unfold in daily slow mo.

Fast background, amounts, Big 4 players, and some links

Fast background – A year ago HP bought Autonomy, a major software vendor in Europe. Picture a competitor to SAP. Today HP announced a huge writeoff alleging there has been massive cooking of the Autonomy books.

Amounts – HP paid $11.1B in October ’11. Today they wrote off $8.8B of their investment, saying $5B is for accounting improprieties etc.  I don’t quite understand why there’s another $3.8B writeoff.

Audit players – We have a grand slam here. All 4 are involved.

• Deloitte has been auditing Autonomy for quite a few years.
• KPMG did the due diligence on the purchase. The former CEO of Autonomy said the due diligence team numbered in the “hundreds” of staff.
• E&Y is HP’s auditor. They signed off on last year’s financials, which included that ink-not-yet-dry-deal for buying Autonomy. They also reviewed the 3 quarterly financials since then.
• PwC has been investigating the whistleblower accusations of improprieties since May.  A fraud investigation running since May and the results are made public today? I’ll guess there will be questions on the investigation.

So, the people who enjoy pointing fingers at CPAs will get to point at all 4.

Links. I’m guessing this story will have terabytes of pixels available in the next few days and weeks. If you want an early start so you can watch as the disaster unfolds, here’s a few of the articles I found most helpful:

• Forbes – Francine McKenna – Hewlett-Packard’s Autonomy Allegations: A Material Writedown Puts All Four Audit Firms On The Spot
• Going Concern – Caleb Newquist – This HP/Autonomy “Accounting Improprieties” Thing Hit the Big 4 Superfecta and Other Things We Learned Today
• Wall Street Journal – H-P Says It Was Duped, Takes $8.8 Billion Charge