Four former executives of Irish e-learning group SmartForce have agreed to pay $2.3 million (€1.7 million) between them to settle charges from the US regulator that they violated accounting rules.

The company's former auditor, Ernst & Young, has also agreed to pay $725,000 over its role in the affair.

The charges relate to overstatement of revenue over a three-and-a-half year period from 1999 to June 2002. The US regulator, the Securities and Exchange Commission (SEC), said the company overstated turnover by $113.6 million and net profit by $127 million over that time.

The SEC said SmartForce's financial statements improperly recognised certain revenues.

The regulator had taken administrative and civil actions against former chief financial officer David Drummond, who subsequently moved to Google, where he is now chief legal officer and vice-president of corporate development. It took similar actions against two Irish former vice-presidents of finance at SmartForce - John Hayes and Patrick Murphy - and against Patrick Chew, former controller of SmartForce's subsidiary in the US.

David Bergers, the director of the SEC's regional office in Boston, said in a statement last night: "Recognising revenue without sound, rigorous analysis is a recipe for false finance statements. Officers must ensure the financials are accurate and cannot hand off that fundamental responsibility to their subordinates, the auditors or anyone else."

Walter Ricciardi, SEC deputy director of enforcement, said Ernst & Young's Irish operation had agreed to make several "enhancements" in its audit practices of US public companies.

The $725,000 settlement from Ernst & Young was equal to the company's audit fees for the periods in dispute.

In addition, Irishman David O'Hogan, the firm's lead partner on the SmartForce audit, has incurred a two-year suspension from auditing public companies in the US.

Under the terms of the settlement, none of the parties admitted or denied the SEC findings.