AOL Time Warner has admitted it may have "improperly" accounted for advertising revenue worth £31.7m.

The transactions took place at its AOL internet division, whose accounting practices are being investigated by the US justice department and the securities and exchange commission.

In a filing to the stock market regulator, AOL Time Warner said it may have "improperly recognised" as advertising revenue three payments America Online received over a period of a year and a half.

It did not identify the transactions involved.

It made the discovery in the week of August 5, just two weeks after the company revealed the SEC had opened an inquiry into its accounting practices.

The revelation could not come at a worse time for AOL. Ad revenue at its online division has plummeted and the company has been criticised for not making the most of the merger between AOL and Time Warner.

It emerged yesterday that David Colburn, a senior executive who negotiated advertising deals for the company, had left the company.

AOL would not comment on the circumstances of his departure.

The Washington Post last month revealed AOL's unusual techniques for booking revenues. For example, ads sold on behalf of eBay were treated as AOL revenue.

The Enron and WorldCom accounting scandals have increased the pressure on major companies to issue spotless accounts.