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Krispy Kreme Dougnuts: Empty Calories or Empty Profits?
Case Study of the Impact of Sarbanes-Oxley Act ("SOX")

Krispy Kreme Doughnuts (KKD), a once high flying growth stock has been hampered as of late with shareholder lawsuits. When sales growth and earnings began to drop significantly in 2003, the company blamed its problems on the popularity of low-carbohydrate diets like Atkins and South Beach at the time. But the SEC began probing Krispy Kreme's accounting for franchise buybacks and is now facing shareholder lawsuits for inflating profits. Senior management officials allegedly knew of the problems, but continued to pad sales figures by doubling doughnut shipments to wholesale customers at the end of fiscal quarters, according to lawsuits.

Inflated Sales:

The suit alleges that between January 2003 and last May, when Krispy Kreme issued a profit warning, "the company issued false and misleading statements, including false financial results" and "repeatedly ratcheted......

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Approximate Word Count: 5230
Approximate Pages: 21 (250 words per double-spaced page)

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