Krispy Kreme Doughnuts, which is under a federal accounting probe, said a former chief executive officer, Scott Livengood, and other officers may have inflated earnings in order to beat forecasts.

“The number, nature and timing of the accounting errors strongly suggest that they resulted from an intent to manage earnings,” a report by a special committee of the Krispy Kreme board released yesterday read. Restatements will cut pretax profit by an estimated $25.6 million through the third quarter of 2005.

Krispy Kreme, the no. 2 doughnut chain, has not reported earnings for three quarters as the Securities and Exchange Commission and federal prosecutors examine how the company accounted for the repurchase of franchises. The committee in its 250-page report also said some directors should be removed to create an independent board.

“The whole point of this exercise is the company made things up to get their stock higher,” said Marc Cohodes at Rocker Partners LLC in Larkspur, Calif., who has a short position in the stock, which is a bet the shares will fall. “How this is allowed to trade and be listed on the New York Stock Exchange with knowingly fake numbers is beyond me.”

Mr. Livengood and a former chief operating officer, John Tate, “bear primary responsibility,” the report said.

“Krispy Kreme and its shareholders have paid dearly for those failures, as measured by the loss in market value of the company’s shares, a loss in confidence in the credibility and integrity of the company’s management, and the considerable costs required to address those failures,” the committee said.

The doughnut company’s shares rose more than ninefold after an initial public offering in April 2000 as the chain’s rapid expansion fueled sales gains. The stock dropped 66% last year, hurt by a fiscal 2005 first-quarter loss, the SEC’s probe of the company’s accounting and Mr. Livengood’s withdrawal of profit and sales forecasts.

The report said the employees interviewed as part of the probe denied any intent to manage earnings or giving or receiving any instructions to take such action. All officers or employees who may have had substantial responsibility for the accounting errors have left the company.

“I think it’s great that they’ve come out and reported,” said Peter James Hall, who oversees $1 billion at Sydney, Australia-based Hunter Hall Investment Management, which owns 2.4 million Krispy Kreme shares, down from 4 million in March. “I’m very surprised how low the adjustments are. I thought the restatements would reduce net income by more than this number.”