Hewlett-Packard Company (NYSE:HPQ) is currently trying to put together the nexus of fraudulent accounting practices supposedly used by Autonomy Corp. to inflate its value before acquisition. At least one value fund manager saw the company’s problems, and he reported them weeks ago.

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At the Santangels conference in New York, John Hempton, founder of Bronte Capital Management, delivered a presentation on how to fraudulently prepare accounts. The presentation was designed to teach those present how to spot a company that has cooked its books.

Hempton, in a blog post published today, admits that he knew something was up at Autonomy. The only problem with his assessment, was that the real problems were much, much worse. Hempton, among others, noticed that Autonomy was doing some unusual accounting. Why couldn’t Hewlett-Packard Company (NYSE:HPQ) see the same thing?

Hempton points to the profit and loss accounts, and the balance sheets from Autonomy’s 2010 accounts in order to push his point. In basic terms, the income structure the company was claiming simply did not hold up to scrutiny. It was unlike the income structure of any other software company. For more in depth details, look at his blog.

Hewlett-Packard Company (NYSE:HPQ) did not manage to catch this little piece of fraud. It can be presumed that the company expended many more man-hours checking Autonomy accounts than Hempton did. They simply did not notice what should have been obvious to specialists in software accounts.

John Hempton is up front in admitting that he was not the only one to notice the problems with the books at Autonomy Corp. Analysts from the Financial Times Alphabook saw it coming, as did Jim Chanos. Jim Chanos was so certain that the company was committing fraud that it was his biggest European short in early 2011. His fund actually published a report about the problems with the company.

This is not the first time that a large firm has been burned by a fraudulent acquisition, and it almost certainly will not be the last. John Hempton thinks that the Hewlett-Packard Company (NYSE:HPQ) CFO responsible for the deal should resign. That may not be a bad idea, given the current state of the company.

John Hempton will be speaking at the Value Investing Congress in May 2013. However, readers can get a huge discount off of the conference by registering now. The price goes up every month so act soon! Details are below.

Other confirmed speakers include, Steven Romick of FPA, J. Carlo Cannell of Cannell Capital, David Nierenberg of D3 Family Funds, and Guy Gottfried of Rational Investment Group.

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