The audit committee of Diamond Foods Inc, the maker of Emerald nuts and Pop Secret found in February 2012, that the company will have to restate its 2010 and 2011 financial statements due to improper accounting for the payments to walnut growers. The payment to walnut growers of about $20 million in August 2010 and another amount of $60 million in September 2011 were not booked in the right periods. Thereby the expenses were under recorded leading to higher net income or profit numbers for the company in the effected periods. On the balance sheet the working capital would be overstated as well as the current ratio for the company would have been affected.
The company ousted its CEO and CFO in February, and had to undergo an SEC investigation. As the issue would lead to restatement, the clawback provision would be set off. Under the Sarbanes-Oxley Act, the law permits the SEC to seek repayment from the CEO and CFO of any bonus or other incentives or equity based compensation received in the 12 month period after release of the financial statements that will be later restated. The company auditors at this time were Deloitte and Touche.