Re: The due diligence report wasn't read
The point about audited accounts is that they only indicate one view of the truth.
You can rearrange the numbers - without lying - to give an entirely different viewpoint, should you wish.
That's not really true. There is only one set of audited accounts, that if you're a plc will be published and issued to the tax man.
It is true that there are often lots of judgement calls in accounting. But they tend to apply to what you book as profits and how you account for costs. So for example you can artificially boost profits by having lower bad debt provisions booked than the bad debt you expect to actually happen. The KPMG report talks about this, and implies that Autonomy had what were probably uncollectable debts on their books as an asset - however it also states that they also had provisions for this bad debt in retained profits - so as long as the two match there's little material effect.
Obviously you can change the books to get different tax outcomes, but that's not really changing the books, so much as changing the company structure in order to minimise tax. And once done, it's a semi-permanent thing.
Another way to artificially boost profits is to book costs as capital expenditure, so that the cost can be spread over several years, thus reducing the effect on profits of current spending. However even this has no actual effect on profit in the long-run, you've spent the money and will either get a return on the investment or not, the difference is having a dip in profits in one year to cover all the costs (KPMG said GAAP and HP's rules don't allow this capitalisation of R&D) or having smaller profits for the next several years to spread it out evenly.
The thing that audited accounts give you very accurately is cash flow. You can play around with profits by booking future revenues into the current year (as many software companies have done), and the above methods. But the cashflow is something there's almost no judgement on. What money went in and out of the company's various accounts. And that's the important thing to judge a company on. If they've got a negative cashflow, but are showing profits, you need to be asking questions.