Snack maker Diamond Foods is reportedly being investigated by federal prosecutors who are working with the Securities and Exchange Commission to probe the accounting for the company’s payments to walnut growers.

Diamond revealed last fall that it had made a pre-harvest “momentum payment” to walnut growers in early September, prior to the delivery of the fall walnut crop to reflect the fiscal 2012 projected market environment. The company said the payment had been accounted for in its fiscal 2012 cost of goods sold and in the guidance provided by the company on Sept. 15, 2011.

However, several walnut growers said they received payments for nuts they didn’t plant and questions have arisen over whether the payments were timed for the purposes of earnings management.

The company revealed that its audit committee was looking into the timing of the payments and how they were recognized on the books. The Securities and Exchange Commission began probing whether Diamond violated accounting rules shortly after the company’s audit committee began its investigation.

Diamond, which sells the Emerald brand of nuts, Kettle potato chips and Pop Secret popcorn, has been preparing for its largest acquisition ever, the purchase of Pringles from Procter & Gamble for $2.35 billion, announced last April. The investigation has raised questions over whether that acquisition will be completed, and shares of Diamond have been volatile in recent months.

On Thursday, The Wall Street Journal revealed that prosecutors in the U.S. Attorney’s Office in San Francisco have also launched a criminal investigation. Shares of Diamond slid up to 11 percent on Friday morning following the report. Two major investors in the company also began selling off their shares on Wednesday.

Diamond Foods said it was cooperating with the investigation. “Diamond continues to cooperate with the SEC in its ongoing investigation," said a Diamond Foods spokesperson in an emailed statement. "The SEC has said its investigation should not be construed as an indication that any violations of law have occurred. It is not unusual for the SEC to coordinate with other agencies and to the extent other agencies request information, the company would cooperate fully. Diamond’s internal investigation into certain crop payments to walnut growers is ongoing and the audit committee has reached no conclusions on the matters it is examining. The audit committee currently anticipates completing its investigation by the middle of February.”