UPDATE 1-Hudson Highland reports lower 3rd-qtr profit

(Adds revenue, outlook, details on accounting issue)

NEW YORK, Oct 24 (Reuters) - Staffing services provider Hudson Highland Group Inc (HHGP.O: Quote, Profile, Research, Stock Buzz) reported lower quarterly profit on Wednesday, hurt by higher expenses and a discontinued operation.

Net income for the third quarter ended Sept. 30 was $3.9 million, or 15 cents per share, compared with $4.3 million, or 17 cents per share, a year ago.

Quarterly revenue fell slightly to $341.3 million from $341.5 million a year ago.

Operating expenses in the latest quarter were $127.2 million, up from $120.5 million a year ago.

In the latest quarter, Hudson Highland was also hurt by its treatment of its Australian Trade and Industrial business as a discontinued operation. Hudson said earlier this month it had agreed to sell that business, saying the Australian blue-collar labor market was no longer core to its long-term business strategy.

The company said it is working to resolve an accounting issue that could cause it to reclassify up to $19 million from goodwill to compensation expense, and therefore require a restatement of prior financial statements.

The company said it expects fourth-quarter revenue of $325 million to $340 million and adjusted earnings before taxes, depreciation and amortization of $12 million to $14 million, excluding the impact of any future restructuring, acquisitions or divestitures. (Reporting by Martinne Geller)