Diamond Foods Case Study : Diamond Foods : Business Case

Inferior Company Leadership - President Barry Louden failed to manage the business at a high level, recognize the warning signs, and proactively deploy a strategy for improvement. He fired his accountant and allowed the company to flounder, displaying no sense of urgency, taking on increasing amounts of debt, and failing to reach out to Ashmark for help until it was too late.

Fraudulent financial reporting is one form of corporate corruption and may involve the manipulation of the documents used to record accounting transactions, the misrepresentation of accounting events or transactions, or the intentional misapplication of Generally Accepted Accounting Principles (GAAP) (Crumbley, Heitger, and Smith, 2013). Examples of fraudulent schemes befitting of this category abound and usually involve financial statement items that have been misclassified, omitted, overstated, undervalued, or prematurely recognized. One case involving CEO Bill Smith of Moonstay

) There was a lack of adequate cut-off procedures to ensure the timely recording of certain period-end accruals. This resulted in an audit adjustment of $3,578,000. The benchmark for overall materiality is $3,508,000, I would consider the audit adjustment of $3,578,000 a material misstatement. Control environment, principle 2 the board of directors and management exercise oversight of development and performance of internal controls. Due to the severity and material weakness of lack of adequate cutoff procedures to ensure timely recording of period end accruals. Management and the board of directors should evaluate performance of internal control activities including adherence to standards of conduct and expected levels of competence. In

Moreover, NutraCea also inappropriately documented revenue on a bill and hold Transaction in regards to a $1.9 million sale of product to ITV Global, Inc. in the 4th quarter of 2007. Which resulted in a misstatement of NutraCea’s operating loss of by over 89% in the 2nd quarter, 17.6% in the 3rd quarter and close to 7% in total all for the fiscal year 2007. To put the icing on the cake NutraCea misstated Form 10-K for the fiscal year 2007.

The changes in the above given accounting policies and estimates, affected the reported profits as follows:

Royal Ahold 's new management team 's aggressive tactics didn 't just stop here; there was a large corporate push to do more all around creating a hostile tone at the top. Management set extreme earnings and revenue goals each year and there was extreme pressure from top management for their subordinates to reach these goals. To couple with these high demands there was also an incentive compensation plan set in place that awarded huge bonuses. With these high expectations set and a decentralized work environment at Royal Ahold, fraud flourished quickly.

Many organizations have been in the news over the past few years due to accounting ethical breaches that have affected their customers, employees, and the general public. I searched the Internet to locate a story in the news that depicts an accounting ethical breach. I selected Krispy Kreme. I enjoy their hot donuts and was curious to learn more about how they played with the numbers. For some reason I always want to dig into the trickery behind the manipulation of financial statements.

The chief executive of the company was closely working with the vendors whose confirmations were vital in the auditing work and hence they could have submitted false confirmations. The auditing firm established a national risk management program for its clients and so national reviews were done to identify the high risk items in the financial statement. The vendor allowances were particularly high but they were not documented. As such, the auditors were supposed to demand for the documentations and compare them with the real figures. It is however noted that most of the documentations received were non-standard and this could have led to a different audit report given that vendor allowances were earlier identified as a high risk area. Inventory management was found to be poor especially in the allowances for inventory reserves. The audit firm was therefore obliged to carry out a thorough evaluation of the inventory reserves and determine whether it was reasonable. The valuation was also supposed to include all classes of inventory but for the case of the company, the evaluation excluded instances where no sales had been made. Hence, this evaluation could not accurately represent the position of the inventory reserve in the company. (Waters,2003)

As the WMI accounting fraud case shows, change exposes organizations to considerable financial fraud risks. The top officials used acquisitions and merger as means to perpetuate this fraud. This financial fraud took place due to the organizational breakdown of internal and external audit controls. As a result, the top management was able to commit this massive fraud without facing any resistance. It never occurred to them that they were violating the law because what mattered to them was pocketing as much as they could.

Foods Fantastic Company is a public company which mainly operating regional grocery store in Maryland. This Company relies on application programs, such as bar-code scanner, to entre sales to the system. The FFC majority depends on the computer system to run their business. Based on this situation, the Information General Controls review is necessary for this company as the reason that ITGC is the foundation of every categories of the internal control.

“Audit committee members or their agents may proactively examine areas, functions, and personnel where collusive fraud risk is reasonably likely to be perpetrated,” (Zmags). The search for fraud, even if performed in the same location multiple times, may continue until the audit committee feels confident that they have ruled out the probability that fraud is prevalent. One of the biggest risks of fraud is management override of controls, requiring the extensive search for risk in, “journal entries and other adjustments and reviewing accounting estimates for possible biases that could result in material misstatements,” (Nysscpa).

After having to restate both its 2010 and 2011 financials in 2012, it was discovered that the company was operating at a net loss of $86,336,000 and earnings (loss) per share of $3.98. During 2012 the company’s stock price dropped significantly by about 54 percent from $21.50 in early November to $12.50 in late November (U.S. District Court for the Northern District of California, 2012, In re Diamond Foods Inc., Securities Litigation: Complaint). On November 14th, 2012 Diamond restated its financial statements which reduced its 2012 first, second, and third quarter earnings. This also reduced the company’s 2011 and 2010 earnings by 57% to $29 million and 46% to $23 million respectively (Mintz, 2013). Mendes and Neil with the assistance from Deloitte had such a tight control, making the ability to detect the fraud difficult. This caused the fraud to be concealed, which led to serious financial implications, and the need to restructure the company’s top management.

Golden Valley Foods, Inc. is a 127-year-old company that prepares packages and sells canned and frozen foods which include fruits, vegetables, pickles and condiments. Golden Valley has more than 30 processing plants in operations and annual sales of approximately $650 million. Much of Golden Valley’s management staff comes from their parent company with the previous president saying “The influence of our old parent company is still with us. As long as new products look like they will increase the company’s sales volume, they are introduced. Traditionally, there has been little, if any attention paid to

There were several core problems that were interrelated around the strategy, organization, and structure of the company. Strategically, they were trying to do too many things. It wasn’t clear what the core businesses were,

Specialty Food and Beverage company (SF), which founded in 2004 in Denmark, mainly covers foods and beverage, restaurants and hotel area. Recent years, the company had faced several problems which lead SF to an embarrassing situation. This assignment will introduce SF’s current issues, analyze the decision and then discuss the solution way which chose by SF’s high level management team.