Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. How does the SEC allege.

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Presentation transcript:

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. How does the SEC allege that Diamond Foods fraudulently increase earnings? Original blog posting (February 19, 2014)

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. SEC recently charged Diamond with misleading investors Cost of walnuts increased steadily in 2010 and 2011 Diamond found that it could not meet its earnings estimates as the cost of walnuts increased To help to meet earnings estimates, the CFO instructed his finance team to pay the walnut growers two special payments per year

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 1 Were the special payments to the walnut growers illegal or fraudulent?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 2 How (what accounts) did Diamond book the fraudulent payments? Write the journal entry that could have been made when a payment was made to the walnut growers. If you do not know the exact account impacted, describe the account and

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 3 What accounts should have been impacted by the special payment to the walnut growers?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 4 Do you think this fraud scheme could have been sustained by Diamond over several years? Why or why not?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question Recap 1.Were the special payments to the walnut growers illegal or fraudulent? 2.How (what accounts) did Diamond book the fraudulent payments? Write the journal entry that could have been made when a payment was made to the walnut growers. If you do not know the exact account impacted, describe the account and 3.What accounts should have been impacted by the special payment to the walnut growers? 4.Do you think this fraud scheme could have been sustained by Diamond over several years? Why or why not?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at Related video resources can be found at Questions or comments? Contact Dr. Wendy Tietz at