Troubled iSoft pushed one step closer to FRRP probe
Internal investigation at iSoft has uncovered evidence of accounting irregularities
iSoft, the struggling software group, has moved closer to a full probe from
the Financial Reporting Review Panel after an internal investigation uncovered
evidence of accounting irregularities.
A second investigation into the findings of the initial probe, which was
instigated by iSoft’s auditors Deloitte, has begun and will take a closer look
at iSoft’s accounts for 2004 and 2005.
The company’s acknowledgement that there were formal grounds for a further
investigation into irregularities has increased the likelihood that the FRRP
could become drawn into the matter.
An iSoft spokesman said that the involvement of the panel could not be ruled
out. ‘The matter has not been reported to the FRRP yet. It may be reported, it
may not be reported,’ he said.
iSoft, a major software supplier to the NHS’s National Programme for IT, also
announced that it had suspended commercial director Steven Graham and another
employee. The company added that other employees who had since left also
appeared to be involved.
Graham was one of the founding members of iSoft, and played a key role in the
management buy-out of iSoft from KPMG in 1997. Graham’s suspension means that
iSoft has lost the service of three of its founding executives. Former chairman
Patrick Cryne left iSoft in 2005 and chief executive and former FD Tim Whiston
resigned in June.
If accounting irregularities are proven, the Accountancy Investigation and
Discipline Board could launch an investigation to examine the conduct of
qualified accountants involved in the iSoft controversy.
iSoft was forced to overhaul its accounting policies in June and downgrade
forecast profits for 2006 from £22m to £7m. The group had been plagued by
criticism for recognising revenues too early and using an off-balance sheet
credit facility.
It still has to release its 2006 results, which have been delayed twice. If
it fails to release its numbers by the end of August it will be suspended from
the London Stock Exchange. To meet this deadline it will have to conclude its
investigation, complete frantic banking covenant talks and renegotiate its NHS
contract.