AOL revenues under investigation

AOL Time Warner admitted yesterday that it is at the centre of a Securities and Exchange Commission "fact finding" inquiry over a series of transactions that may have improperly boosted its revenue.

As expected in a climate where any suspicion of accountancy malpractice sends investors running for cover, AOL's stock took a 12 per cent dive to $10.05 this morning.

The media giant must now prove that its book keeping is legitimate.

According to a number of articles in the Washington Post AOL allowed a company to buy advertising space instead of paying the arbitration fees from a legal dispute, and sold ads for eBay but booked them as its own revenue.

AOL said that all transactions had been signed off by its accountants, Ernst & Young.

But a number of Wall Street firms, including Goldman Sachs, Salomon Smith Barney and Merrill Lynch, said they would reduce investment ratings on AOL.