Auditors sucked into iSoft chaos

Deloitte could be dragged into the controversy clouding FTSE 250 IT company
iSoft, after analysts expressed concern over accounting problems.

iSoft changed auditors from RSM Robson Rhodes to Deloitte at its AGM last
year. Deloitte has performed a review of iSoft’s interim results, but still has
to give a full audit opinion on the final accounts, which are expected in June.

Analysts said that iSoft, which is involved in the rollout of the NHS’s
national programme for IT, recognised 100% of revenues for its NHS work upfront,
even though the contract was over a lengthy period.

There were further concerns that iSoft was using a £70m off-balance sheet
credit facility by issuing letters of credit against customer prepayments. This
did not count as accounting debt, but could affect iSoft’s banking covenants and
cash flows. Deloitte will have to grapple with these issues during its audit.

Though there are no suggestions of wrongdoing, one analyst was surprised that
more had not been done to address the anxiety hovering over the business’s
accounting.

‘The local service providers and Connecting for Health [the NHS delivery
vehicle] are taking more than 800 debtor days to pay for IT contracts, yet iSoft
is taking revenues upfront. I would be very surprised if the auditors do not
address concerns over revenue recognition when it is taking debtors over two
years to pay up,’ one analyst said.

Another analyst said iSoft could be forced to restate its accounts.

An iSoft spokeswoman would not comment on the company’s accounting policies.
RSM Robson Rhodes and Deloitte also declined to comment.