American Realty Capital Properties Inc (NASDAQ:ARCP) disclosed that its financial statement going back December 31, 2013 are no longer reliable based on the results of the investigation of its audit committee.

American Realty Capital Properties

Following the disclosure, the stock price of American Realty Properties Inc (NASDAQ:ARCP) plummeted more than 31% to $8.45 per share at the time of this writing around 11:57 A.M. in New York.

“The accounting issues are unacceptable and we are taking the personnel and other actions necessary to ensure that this does not happen again,” said David S. Kay, CEO of American Capital Properties Inc. (NASDAQ:ARCP).

Mr. Kay added, “As disappointed as I am, I do not believe that this impairs, in any meaningful way, what is important about our company.” He emphasized that the company has high quality and diversified real estate assets, strong management team and balance sheet and predictable cash flow from its leases.

American Realty overstated funds from operations

American Realty Capital Properties Inc (NASDAQ:ARCP) said its audit committee found that its AFFO of adjusted funds from operations for the three months ended March 31 were overstated.

The audit committee believes an “error was identified, but intentionally not corrected and other AFFO and financial statement errors were intentionally made.” The errors results to an overstatement of the company’s AFFO and an understatement of its net loss for the three months and six months ended June 30, 2014.

According to American Realty Capital Properties Inc (NASDAQ:ARCP), the audit committee did not find any indication that there were errors in the company’s audited consolidated financial statements for the fiscal ended December 31, 2013. However, the audit committee decided to expand its investigation for the period given the fact that its former CFO and former chief accounting officer had primary roles in preparing those financial statements.

American realty appoints new CFO and Chief Accounting Officer

American Realty Capital Properties Inc (NASDAQ:ARCP) said its Chief Financial Officer Brian Block and Chief Accounting Officer Lisa McAlister resigned effective immediately.

The company appointed Michael Sodo as its new CFO and Gavin Brandon as Chief Accounting Officer.

Mr. Sodo previously served as senior vice president, director of financial reporting and treasury of American Realty Capital Properties Inc (NASDAQ:ARCP).  Prior to his appointment, Mr. Brandon served as senior vice president of accounting.

The management of American Realty Capital Properties Inc (NASDAQ:ARCP) said the accounting issues should not affect any previously announced transactions including the sale of Cole Capital to RCS Capital Corp (NYSE:RCAP) and the sub-advisory agreement with ARC Global II.

American Realty Capital Properties Inc (NASDAQ:ARCP) is also re-evaluating its financial reporting and controls. It intends to make the necessary changes to resolve any deficiencies identified through the investigation of the audit committee.