Deloitte’s Fees For Diamond Foods Are Just Nuts!

Yesterday, San Francisco based Diamond Foods filed an 8-K announcing they were dismissing Deloitte as auditor, and engaging PwC. Diamond Foods is the company behind Diamond nuts, Emerald nuts, Pop Secret popcorn, and Kettle brand potato chips (all of which are salted snacks I enjoy).  I took a look at the Diamond 2012 annual report, and to my surprise I saw they paid Deloitte in excess of $16.5 million in audit fees in 2012.  That’s an awful lot for a company with slightly less than $1 billion in annual revenues, especially considering Diamond paid only $1.6 million, or about 10% of that amount, for 2011.  What’s going on?  Diamond explains Deloitte was pretty busy not only auditing the financial statements, but also doing work around an investigation of payments to walnut growers and a restatement of two years of financials. This was one of those restatements that must have had Deloitte scouring the country, and beyond, for staffers they could bring in to help out, shoving them in cramped conference rooms with woefully inadequate ventilation. For a company of Diamond’s size, it takes effort to rack up $16.5 million in fees, even considering Deloitte would have billed at full rates.

Just for fun, I thought I’d benchmark the $16.5 million against the fees Deloitte got from it’s most famous West Coast client, Microsoft. It turns out that Microsoft, a company with nearly 75 times the revenues of Diamond Foods, paid Deloitte $23 million for audit work last year.   My Accounting degree tells me that $23 is bigger than $16, but it also tells me that $23 is not 75x $16.

Granted, there were some pretty serious problems at Diamond Foods  that needed correction (more details in this great writeup at goingconcern.com).  But come on, a tenfold increase in fees?  That’s hard for anyone to stomach.  Not surprising at all that Deloitte was shown the door.

There is a positive angle here; PwC got a $1.6 million annuity out of all this.

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One Response to Deloitte’s Fees For Diamond Foods Are Just Nuts!

  1. Pingback: Big4 Auditor Changes week ending 03/31/13 | Big4 Auditor Carousel

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