M-Systems ( FLSH) has detected discrepancies in certain of its stock option grant dates, leading the flash memory chip maker to restate its financial statements for the past five years.

The company has asked the Securities and Exchange Commission for an extension to file its most recent annual report as a result of the findings, M-Systems announced Monday.

Shares of M-Systems were down 1.8%, or 54 cents, at $29.09 in midday trading.

The news deepens the troubles for the Israeli-based company, which cancelled a secondary stock offering in June when it announced that it had formed a special committee to review of its stock option accounting practices. At the time, the company said it was conducting the review on its own initiative.

Several dozen companies, many of them tech firms, are embroiled in a widening government investigation into the practice of backdating stock option grants.

Since launching its internal review, M-Systems said Monday, the company has received a letter from the SEC requesting that it voluntarily provide certain documents and information in connection with an informal investigation relating to the company's stock option practices.

According to M-Systems, the committee conducting the company's internal review "has concluded that, for accounting purposes, the actual measurement date of certain past stock option grants differ from the previously recorded measurement dates for such grants."

The company plans to restate financial statements from 2001 through 2005, as well as its first quarter results for fiscal 2006, "to reflect primarily non-cash charges for certain past stock option grants."

M-Systems is continuing to evaluate whether it will need to restate financial reports prior to 2001.

The company said it intends to file its annual report by July 17 2006, which it said is within the permitted extension period.

Asyst ( ASYT), another company involved in the backdating controversy, said last week that it was unable to file its annual report within the allowed time frame. As a result, the company said it expected to receive a notice from the Nasdaq that its stock could be delisted.

"M-Systems is a strong company, built on a foundation of personal integrity," said CEO Dov Moran in a statement. "We remain focused on building our business while working closely with the special committee to effectively bring this matter to conclusion as quickly as possible."