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Diamond Food Fraud Essay

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Diamond Food Inc. Assignment Questions: 1. How did “momentum payments” shift expenses into the future periods? Diamond Foods was issuing “momentum payments,” in which the company would send payments to growers in September for walnuts that were delivered in fiscal year 2011, which had already ended in July. It was found that these payments were used by Diamond Foods to inflate the fiscal 2011 results by shifting costs into the upcoming year. Diamond Foods’ “momentum payments” improved the full-year 2011 earnings $2.22 a share. 2. Discuss the incentives that Diamond Food executives had to commit this accounting fraud? Diamond food’s highly ambitious and competitive culture could have increased organizational pressures for fraud. The company …show more content…

Mark Roberts, an analyst with the Off Wall Street Consulting Group, accused Diamond Foods of incorrectly reporting its payments to suppliers. This accusation stated that Diamond Foods was allotting “momentum payments,” in which the company would send payments to walnut growers in September for walnuts that were delivered in Diamond’s fiscal year 2011, which had already ended in July. Reporting payments in the wrong pay period significantly impacted how Diamond Foods’ financial statements were perceived. When first discovered, Diamond Foods denied any wrongdoing, arguing that these payments were an advance on the 2012 crop and had nothing to do with the previous year’s crops. But growers quickly contradicted this defense. Some growers were told to cash their checks even if they were not going to provide crops for 2011. They were reportedly told that the checks were payments for the previous year. An investigation and financial analysis found that these payments were used by Diamond Foods to inflate the fiscal 2011 results by shifting costs into the upcoming year. An internal investigation found that the company, specifically CEO Michael Mendes and CFO Steven Neil, had improperly accounted for these previously mentioned payments to walnut growers, thus twisting Diamond Foods’ financial

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