Shares of Krispy Kreme Doughnuts Inc. fell Monday after the company said an independent auditor refused to sign off on the firm's second-quarter financial statement until an outside law firm hired by the company's board performed additional work.
The Winston-Salem-based company said in a filing Friday with the Securities and Exchange Commission that the auditor, which it did not name, would not complete its review without the additional information.
The Krispy Kreme filing did not discuss the auditor's request, saying only that it concerned "a specific matter relating to an acquisition in fiscal 2004."
"Our independent auditors ... requested that the independent law firm perform certain additional procedures and have advised us that their review of our financial statements contained in this filing is not complete and will not be completed prior to the independent law firm completing such additional procedures, which are currently underway," Krispy Kreme said.
Krispy Kreme told the SEC the dollar amount involved in the probe was "immaterial from a quantitative standpoint."
Krispy Kreme spokeswoman Amy Hughes did not immediately return a message left with her office Monday.
Krispy Kreme said a law firm hired by the company's board had reviewed the same matter now under scrutiny and concluded after a review of electronic files that neither the company nor its employees intentionally engaged in any misconduct.
"Although the company and its audit committee believe that the procedures performed to date are sufficient to conclude the matter, the audit committee has authorized the independent law firm to perform the additional procedures, primarily related to a further review of certain electronic files," the company said.
Krispy Kreme's stock, which traded above $40 less than a year ago, has been under heavy pressure this year following a first-quarter loss and sub-par earnings in the second quarter.
Executives recently confirmed that Krispy Kreme is the subject of an "informal, nonpublic inquiry" by the SEC on its franchise reacquisitions and its earnings forecasts. Some shareholders have filed lawsuits alleging they were misled by the company.
In announcing second-quarter results last month, Krispy Kreme said it would scale back expansion plans after earning $5.7 million, or 9 cents per share, in the three months ending Aug. 1, compared with $13 million, or 21 cents per share, a year earlier.