Merge Technologies Inc. disclosed in its 2005 financial statement filings with the SEC that company executives had bypassed [tag]internal controls[/tag] over the accounting function in order to inappropriately increase revenue and profits since 2002. Correcting these [tag]irregularities[/tag] decreases the company’s profits for those years.

Experts are a bit surprised that the company is admitting to the potentially illegal conduct. The SEC is conducting an informal inquiry into Merge’s accounting practices, and this admission could lead to the SEC elevating it to a formal inquiry.

Merge Technologies does business as Merge Healthcare, and the company develops software for diagnostic imaging centers, manufacturers of medical imaging equipments, and some hospitals.

Problems with the financial statements came to light shortly after a June 2005 purchase of Cedara Software Corp, which more than doubled Merge’s size.

The restated figures are:

2005 – Revenue $82.6 million; Net loss $2.7 million

2004 – Revenue $26.3 million (decrease of over $10 million); Net income $2.2 million (decrease of over $5 million)

2002 through 2003: Revenue decrease of over $6 million; Net income decrease of $3 million