The US Securities and Exchange Commission (SEC) had begun checking Qwest's transactions in March, focusing on network capacity Qwest had sold to competitors.
The network agreement involved Qwest buying network space from the same companies, but the move has been seen as a simple ruse to artificially boost sales and the company's share price. Though the company's operating results appeared healthy, the firm has been left with an underused network that it spent billions of dollars building. Qwest is now almost $27bn (£17bn) in debt.
Qwest, which shares ownership of the failed KPNQwest telecoms network in Europe, says it will have to restate its financial sales for both 2000 and 2001, involving claimed sales of $1.16bn (£0.74bn). Qwest has also withdrawn its sales forecast for 2002, after concerns over usage of its fibre optic network in the USA.