iSoft crisis deepens as FSA launches probe

The growing crisis at troubled UK software company iSoft deepened on Thursday morning after the company revealed it is being investigated by the UK's financial regulator.

The Financial Services Authority (FSA) launched its investigation after auditors at Deloitte flagged up possible irregularities in iSoft's accounting practices earlier this month. In July, iSoft admitted it was looking into problems with its accounting.

iSoft said in a statement: "The findings of the initial investigation were passed by the group [iSoft] to the FSA. The group has now received notification from the FSA that they will be undertaking a formal investigation into the possible accounting irregularities."

The key issue appears to be whether iSoft recognised certain profits in its accounts earlier than it is allowed to, under accounting law.

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iSoft's share price initially fell by around seven per cent to 38p but then recovered slightly to around 40p. The stock has fallen by about 90 per cent this year.

News of the FSA investigation is just the latest problem to hit Manchester-based iSoft, whose software lies at the heart of the multi-billion pound NHS IT upgrade.

Earlier this week, a leaked report warned there is "no believable plan" for the development of iSoft's Lorenzo clinical records software.

iSoft has still not filed its fiscal 2006 preliminary results, which were originally due on 11 July. The company also suspended a senior manager earlier this month.

Graeme Wearden writes for ZDNet UK