Ouch! Why Electronics for Imaging, Inc. Stock Plummeted on Friday

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What happened

Shares of Electronics for Imaging (NASDAQ: EFII) plummeted as much as 43.8% on Friday after the computer printing technology company admitted to likely accounting woes. The stock is down 43.3% at the time of this writing.

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So what

In a statement on Thursday after market close, EFI announced the postponement of its second-quarter financial call, in which it anticipated discussing the quarter's preliminary results. It said it is postponing the call "in order to enable the Company to complete an assessment of the timing of recognition of revenue."

EFI said it is also in the process of completing an assessment of its "current and historical disclosure controls and internal control over financial reporting." The most likely main reason the stock is selling off on Friday is that the company said it expects this assessment will reveal a "material weakness" in its internal control over the financial reporting being reviewed. In addition, EFI said it expects that its disclosure controls "were not effective in prior periods."

Now what

These accounting woes pose a number of risks for investors. Not only could a review of the company's reporting methods reveal additional problems, but these assessments could also result in costly litigation, which could negatively impact EFI's bottom line.

EFI said it will announce its new date and time for its second-quarter conference call in a subsequent press release.

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Daniel Sparks has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.