Allegations of Diamond Foods Inc.’s’ Understatement of Accounts Payable.
Abstract On November 1, 2011, Diamond Foods Inc.’s (NASDAQ: DMND) unexpectedly disclosed serious discrepancies (possible understatement of accounts payable) regarding its 2011 financial statement reports and as a result announced its decision to delay its acquisition of the Pringles snack business from Procter & Gamble Company (P&G) (NYSE: PG). Naturally, the November 1, 2011 confession caused an immediate plunge of Diamond Food’s stock price, but worse, it triggered several lawsuits from furious investors and created rumors about the future viability of the company. The purpose of this study is to determine the facts and critically analyze the
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Prior to joining Diamond, he served in various companies in financial and information systems capacities. Neil holds an M.B.A. degree from UCLA, a bachelor’s degree in mathematics from UCSB and is a Certified Public Accountant in the state of California. Neil appears to have a lot less knowledge and experience regarding the intricacies of Diamonds operations, but has significant knowledge and experience with financial statement operations and reporting. The Nut of the Problem Before Diamonds’ initial public offering in 2005, it core business product for years was packaging and marketing various type of nuts, particularly walnuts. The relationship between Diamond and its walnut farmer suppliers is apparently long and tenuous. For example, according to Alpert (2011, November 5) “the Wall Street Journal talked to some walnut growers and found serious issues with Diamond’s accounting”. Interestingly, prior to Diamonds’ announcement to acquire the Pringles chips division from P&G on April 2011, numerous financial institutions such as Bank of America Merrill Lynch, Morgan Stanley and the Blackstone Group scrutinized the Pringle chips deal and didn’t find any irregularities with the financial proposal. However, the conditions were about to change for Diamond. Apparently it was the Internal Audit Department at Diamond that first identified the accounting issue after it was pressured by the