UPDATE 1-Avid posts surprise Q3 profit; probes rev recognition

* Q3 adj EPS $0.02 vs loss/shr est $0.01

* Q3 rev $153.7 mln vs est $159.5 mln

* Says audit panel overseeing a rev recognition probe

* Shares down 2 percent

Oct 22 (Reuters) - Digital video editing and software firm Avid Technology Inc (AVID.O) posted a surprise third-quarter profit, helped by a 40 percent drop in operating expenses, and said its audit panel is overseeing a probe into revenue recognition on certain product shipments.

The investigation concerns certain shipments of audio products in previous quarters from certain warehouses outside the United States, Avid said, adding that correction of these errors may not have a material impact on its financial statements.

For the third quarter, net loss was $16.2 million, or 43 cents a share, compared with a loss of $66.4 million, or $1.80 per share, last year.

Excluding items, it earned 2 cents a share, ahead of average Wall Street view of a loss of 1 cent a share, according to Thomson Reuters I/B/E/S.

Operating expenses in the quarter fell to $100.1 million from $167.9 million, offsetting a 30 percent fall in revenue.

Avid shares were down 31 cents at $15.05 in trading after the bell. They closed at $15.36 Thursday on Nasdaq. (Reporting by Deepti Govind in Bangalore; Editing by Pradeep Kurup)