Macy’s Faces Scrutiny Over $154 Million Accounting Errors

NEW ​YORK, November 25, 2024 – ​Macy’s delayed its withdrawal from ​third-quarter revenues as it investigates significant accounting irregularities involving more than $130 million in hidden expenses. The department store chain revealed that only one employee, responsible for shipping small ​parcels, had deliberately hidden between $132 and $154 million over a three-year period. The employee in question was dismissed.

The ​variance represents approximately 3% of Macy’s $4.36 billion spent on ​small ​parcel shipping over ​the same period. Although the company stated ​that the irregularities did not ​affect cash management or supplier payments, the errors revealed a break in internal accounting controls. The audit experts stress that these ​deficiencies should have been identified much earlier, regardless of their intent.

“Your internal control system should have caught it,” said Jerry Maginnis, ​former partner of ​KPMG and current ​member of the Multi-Business Audit Committee. According ​to Maginnis, the incident indicates deficiencies not only in accounting practices but also in surveillance. Macy’s audit committee and its external auditor, KPMG, undertook a forensic investigation to determine how the errors were introduced and why they were not detected.

Irregularities ​come at a crucial time ​for Macy’s, as it prepares ​for the holiday shopping season. Director General It’s me. Spring highlighted the company’s commitment to transparency ​and ethical conduct, saying: “We ​are working diligently to complete the investigation and ensure that this issue is addressed properly, while focusing on implementing a successful vacation strategy. Macy postponed his profit report by December 11 to allow for a full review.

Accounting experts suggest that the situation could lead to the identification of a significant weakness in Macy’s internal controls, a designation that would require disclosure under the Sarbanes-Oxley Act rules. Francine McKenna, an accounting analyst and former audit professional, said: “There ​was a ​hole somewhere. The most powerful controls could have avoided this or at least caught it before.” He also highlighted the pressure on KPMG, a Macy auditor since 1988, to show ​that he had voted strongly on retail accounting practices.

This ​incident ​is ​the most important accounting issue for Macy’s since 2006, when the company resumed financing due to an error in the classification of cash flows. Experts estimate that hidden costs will ​likely result in ​adjustments in revenue reports for several years, ​although errors account for less than 5 per cent of the expenditures involved. Despite this, the news has unsolved investors, with Macy’s stock price falling to 4% in pre-market ​trade ​on Monday.

As Macy’s research continues, the episode highlights the essential role of sound internal controls and ethical accountability in financial ​reporting. Audit professionals and analysts highlight the need for timely monitoring ​of error identification to maintain stakeholder confidence and compliance with regulatory standards.