ISoft, the troubled health software firm and NHS contractor, has suspended its commercial director, Steve Graham, as it embarks on a formal investigation into potential accounting irregularities first disovered towards the end of last month.

The group said it was "appropriate, under the circumstances" to suspend Mr Graham, adding: "One other employee has been put on special leave of absence. The other employees that appear to be involved have since left the group."

Isoft said that initial enquiries had found evidence of irregularities affecting its previous two financial years, ending March 2004 and March 2005.

"The principal effects of this would appear to have been to recognise revenues earlier than they should have been," it said.

The accounting problems had no effect on its current cash position, but that the group felt there were sufficient grounds to merit a formal probe.

Bill Henry, taken on as chief operating officer about five weeks ago, will cover Mr Graham's duties pending the outcome of the inquiry

The move is the latest setback for iSoft, which has issued three profit warnings in the past six months and seen its share price crash since the beginning of the year from more than 400p and fell a further 2.5p today to 57p.

Last month its chief executive, Tim Whiston, resigned, in a departure believed to have been prompted by pressure from shareholders.

It also comes as iSoft continues to negotiate funding levels with its bankers amid continued uncertainty over its flagship contract with the NHS, estimated in 2004 to be worth about £300 million to the company.

Analysts at Bridgewell said: "This issue will doubtless prolong negotiations with banks and cause continued uncertainty for iSoft and [put] pressure on its stock price."

The £6.2 billion upgrade to the NHS's computer system - on which iSoft was the main supplier - has been beset with delays. The Government has warned that the project, already in the works for three years, could be delayed for a further two.

Management consultants at Accenture have blamed iSoft for delays to the project, which involve transferring the records of 50 million patients on to a new computer system.

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