Financial Statement Restatement
Financial Accounting/ ACC537
April 14, 2014
In this paper I will discuss the restatement of Diamond Food Inc.’s financial statements. The errors in accounting principles involved and what effect it had on financial statements. How changes affected the stockholders.
In February 2012, Diamond Foods Inc., issued a statement that they have to restate the financial statements for 2010 and 2011. Diamond Foods Inc., was forced by the audit company y to restate earnings after an extensive investigation. It was discovered that “internal controls were inadequate and that certain grower payments for the 2011 and 2010 crops were not accounted for in the correct periods” (Harris, 2012).
After the investigation, the Board of Directors took control of the company. The board dismissed the CEO and CFO and placing them on ...view middle of the document...
With the acquisition of Pringles by Diamond Foods now on hold the company still showed to be financial sound with products continuing to grow the business. The restatement will take the cost to previous accounting periods.
The Securities and Exchange Commission charged both Diamond Foods and the former CFO with accounting fraud. While Diamond will be required to pay $5 million to settle charges. The CEO Michael Mendes has agreed to pay $125,000 to settle separate charges of negligence. Mendes gave back $4 million in bonuses. It’s been two years and CFO Steven Neil has not been on trial and continues to claim his innocence.
The shareholders of Diamond Foods sued the company. Investors who bought stock in the firm before the $2.3 billion deal to buy Pringles fell through due to the accounting errors that sent the price of the shares plummeting. The company will pay $11 million in cash and issue 4.45 million common shares to a fund to settle the lawsuit against the company and two of its former officers. (Peters, 2013)
In conclusion, it has been two years since the Diamond Foods Inc. accounting scandal and the company still has plenty of work to do in order to but this scandal behind them. New CFO Ray Silcock is focused on creating an internal audit function and trying to redevelop the brand Emerald nut by eliminating products that are not profitable. The company went to their investors following the restatements and kept them informed about the lawsuits and their settlements. It is important that Diamond Foods show that there is integrity in the organization and that all rules are followed.
Harris, R. (2012). Behind Diamond Restatement, CEO, CFO Ousters: A Damning Audit Review. CFO World.
Peters, C. (2013). Diamond Foods to pay $96 million to settle shareholder lawsuit. Reuters.