What type of control is segregation of duties and what risks is that control int

Question

What type of control is segregation of duties and what risks is that control intended to mitigate? f. What controls could Chesapeake have implemented that may have prevented the embezzlement? diamond foods, inc. In February 2012, the wall street journal reported that diamond foods, Inc fired its CEO and CFO, and would restate financial results for two years. The restatement was required after the company found that it had wrongly accounted for crop payments to walnut growers. The investigation focused primarily on whether payments to growers in September 2011 of approximately $ 60 million and payments to growers in September 2011 of approximately $ 60 million and payments to growers in August 2010 of approximately $ 20 million were accounted for in the correct periods. Shareholders suing the company allege the payments may have used to shift costs from a prior fiscal year into a subsequent fiscal year> In a February 2012 filing with the SEC, the audit committee stated that diamond has one or more material weaknesses in its internal control over financial reporting. In January 2014, the SEC charged Diamond foods and two former executives for their roles in the accounting scheme to falsify walnut costs in order to boost earning and meet estimates by stock analysis. Diamond foods agreed to pay $ 5 million to settle the SEC's charges. does the restatement suggest that the companies internal controls

Explanation / Answer

a) The restatement of the accounts establishes that there has been a material mistatement in the accounts for the years 2010 and 2011 with regard to the payments to wallnut growers as also the prior years to which those payments were related to.

The subject payments relate to the years prior to 2011 and 2010, and no liability was created in those years. This is is indicative of material weakness in internal control. It suggests there is not proper procedure for receipt and accounting of the crop received.

b) No, I do not believe that the management's report on internal control over financial reporting is correct.

Had there been propoer internal control over financial reporting, the Management would have reported the mistake in 2010 itself, when the payment relating to a prior year was made for which no liability had been created in that prior year. This aspect is again confirmed by similar omission to report in 2011.

c) The material weaknesses in internal control can be in the following areas:

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