San Francisco: Troubled AOL-Time-Warner, the world's largest media conglomerate, faced further turmoil on July 17 as its number two executive stepped down and it was forced to defend its accounting practices.

Late in the day, the company confirmed that its chief operating officer (COO) Bob Pittman, was resigning. Pittman was serving as interim chief of AOL-Time-Warner's online division.

The 48-year-old Pittman, who early in his career was involved in the creation of the MTV and VH-1 music channels, has been a lightning rod of criticism for the company as its share price slumped in a shrinking advertising market and a slowdown in new Internet subscriber growth.

JP Morgan analysts Spencer Wang and John Blackledge said in a note that Pittman's "credibility with Wall Street has diminished" and they believe investors "could find a management change refreshing".

Last week, AOL confirmed it was looking for someone to run Pittman's Internet division, but contended then that Pittman would stay on at the conglomerate.

The company was also roiled by a Washington Post report that it boosted online advertisement revenue through a series of "unconventional" deals from 2000 to 2002, before and after its merger with Time Warner Inc.

In response, AOL-Time-Warner said in a statement that all transactions reported by the Post were in accordance with generally accepted accounting principles (GAAP).

The Post, citing AOL documents and interviews with current and former AOL staff, said AOL converted legal disputes into ad deals. It negotiated a shift in revenue from one division to another, bolstering its online business.

The transactions cited by the newspaper comprised less than 2 per cent of AOL's revenues during the period in question, the company noted.

The news of possible accounting irregularities and boardroom shakeups come during a turbulent time at the media giant, which saw ad revenues for the company plunge 31 per cent in the first quarter of 2002.

AOL online has also been plagued by slowing subscriber growth. Currently more than 32 million customers pay to belong to the service.

In May, AOL Time Warner executives publicly apologised to shareholders for the company's lackluster performance.

When traditional media company Time Warner merged with Internet-centric AOL in January 2001, it was hailed as a triumph of convergence of "old media" with the new digital world. But a general economic downturn and ravaged online ad markets quickly dashed those hopes.

Just before its merger, the combined market value of AOL and Time Warner was $ 290 billion. On July 18, the combined companies had a market capitalization of just over $ 55 billion.

Its stock, which had a 52-week high of 49.92, has recently been hovering around $13- level, and was ended on July 18 at 12.45, losing 5 per cent.

Earlier in 2002, the media company reported a $ 54.2 billion loss in the company's first quarter, the biggest quarterly loss in US corporate history. Though attributable mostly to accounting practice changes, the shocking figure only highlighted the company's plight. AOL-Time-Warner's troubles have even sparked talk among analysts of undoing the merger, with the online division being spun off to fend for itself.

George Nichols, an analyst with Morningstar, found July 18 revelations disturbing.

"Although we see no evidence of fraudulent accounting (and the revenue in question accounts for a tiny slice of the company's results), this is yet the latest indication that management spares no effort to inflate short-term performance results," he wrote in a note to investors.

"With no credibility and a trend toward providing less disclosure, the management team is overdue for a shakeup. The latest news further damps our limited enthusiasm for the stock."