When I wrote my first book, Finance for Non-Financial Managers, it opened with then-current stories of CEOs whose companies had been caught gaming their financial reporting, while the CEOs claimed they didn’t know because they weren’t accountants, or some such excuse. I posited that CEOs could no longer afford to be non-financial, that they could no longer simply say “I didn’t know what was happening.” Well, Oops! It’s happened again, folks, despite my fair warning.

In a recent Wall Street Journal article (January 10, 2014, Page B4), is the report of a settlement of an SEC complaint against Diamond Foods Inc., in which the CFO knowingly pushed some product purchase costs into a future period to enhance current earnings so they could close a significant acquisition. The deal fell apart when the Journal and others questioned their accounting, and the company had to restate earnings for a couple years as a result. The stock price tanked from $90 to under $13, and both the CEO and the CFO went looking for other work.

But despite the significance of the accounting tricks to the company’s strategic acquisition goal, the CEO claimed he didn’t know about it – and later settled charges against him personally that pointed out that he should have known what was going on.

Now I hate to beat a dead horse, but apparently some folks are still trying to ride it. If you are in a leadership position in your company, e.g., if it’s YOUR company, you need to KNOW that your numbers are basically sound. For yourself, for your banker, for the IRS, or for the investment bankers when you decide it’s time to exit with a handsome profit.

I’m not talking about audit-proof or precise to the penny. But they need to be reasonably close and honestly recorded. If you’re not sure, please read the first paragraph again. And then consider that our Controller for Rent ™ service can help. Better to hear it from people who are on your side of the table, don’t you think?

As always I welcome your comments and feedback.