Price of Autonomy

Say you’re getting ready to sell your company.  It would be “better” for you were your operating results for the past couple of years to be higher.  But the auditors would catch that, wouldn’t they?  That’s what they’re there for, right?

You recorded revenue from contracts unlikely to be paid, recorded deals before they were final, and booked deals without a buyer.  In the restated numbers, your revenue for one year was reduced 54%, and your operating profit went down 81%.

Does the buyer of your business have a cause of action, when they say the value of the business bought was $2.2 billion less that what the (now restated) financials would have justified?  Do you have some ‘splaining to do to the government investigators in the UK and the US? Is your defense that the adjustments due to an accounting dispute were too small to worry about?

“H-P Audit Alleges Autonomy Errors,” Wall Street Journal, February 4, 2014 B6 http://on.wsj.com/1bqQWeb

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Filed under Business Case, Controls, Information, Internal controls, Risk, Third parties, Value

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