The company, which makes software for interactive TV, among other things, announced late Tuesday that it "discovered facts calling into question the appropriateness and timing of revenue recognition involving a single-transaction license fee of $1.84 million."
The transaction will affect results for the fourth quarter of fiscal 2002, as well as the entire fiscal year, which ended May 31.
The company has retained independent outside counsel.
Liberate had reported annual pro forma revenue of $85.3 million and fourth-quarter pro forma revenue of $21 million. The review of financial results continues, according to the company.
"We are committed to resolving this matter as expeditiously as possible, while continuing to focus on our core business of providing video, voice, and data software and services to our customers," Liberate CEO Mitchell Kertzman said in a statement.
Kertzman is a member of the board of directors at CNET Networks, publisher of News.com.