Question One

In our case, the statement seems to suggest that the company internal controls lack the capacity to controls and monitor activities that materialize, the controls are weak.The controls are supposed to ensure that the resources are used for the intended purposes(Johnstone, Gramling, and Rittenberg, 2015). Misappropriation of resources should be identified in the early stages, and appropriate action is taken. Diamond Foods Inc. needed to restatement its previous financial statement issued to reflect the correction of the misstatement. There was a weakness in internal controls.

   Question Two

The internal report that was issued by the management of the diamond foods Inc. was not accurate as they alluded to, this is because the company found out that it had wrongly accounted the payments that the company had paid to the walnut growers (Johnstone, Gramling, and Rittenberg, 2015). The mistake contributed to the wrong reporting since the report indicated that the money was paid to the farmers yet it was used for other purposes that were not included in the report. The investigation that was done did not find out the end person that was paid the money meant to be for the farmers hence making it hard to ascertain the authenticity of the payments. Also, the payments seem inconsistent between the two years 2010 and 2011, yet the supplies were almost equal.

Question Three

The internal controls of the diamond foods Inc. might consider excluding appropriate approvals and reviews of accounting entries (Johnstone, Gramling, and Rittenberg, 2015). This might have occurred when the internal control of the company failed to confirm the recording of costs that were recorded to various books of account within the period. The material weaknesses that exist in the company include internal controls that check financial reporting. This ensures resource misstatements are detected on a timely basis for action to be taken. Moreover, reconciliations are not done on a timely basis.

Reference List

Johnstone, K., Gramling, A., and Rittenberg, L.E., 2015. Auditing: a risk-based approach to conducting a quality audit. Cengage Learning.

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