Macy's $132 million mystery has auditing experts scratching their heads

Accounting Error and Internal Control Breakdown - Macy's discovered an employee intentionally made accounting errors totaling $132 to $154 million over three years [1][3] - The error represents less than 5% of the $4.36 billion spent on small package delivery expenses during the same period [5] - The company fired the responsible employee and launched an investigation [4] Internal Control and Audit Issues - Auditing experts suggest a failure of internal accounting controls, as the issue should have been caught earlier [1][3] - The accounting profession relies on individuals' personal commitment to truth-telling, but stronger internal controls could reduce reliance on individual choices [11] - Macy's auditor, KPMG, faces pressure to demonstrate appropriate scrutiny of the company's accounting practices and controls [13] Impact on Earnings and Disclosure - Macy's delayed its quarterly earnings release due to the accounting error discovery [3][7] - The company's next update is scheduled for December 11 [7] - Some experts argue that Macy's may have disclosed more than required by delaying earnings and announcing the issue [8] Historical Context and Industry Implications - This is Macy's first major accounting issue since 2006, when the company restated financials due to a "cash flow classification" [6] - The Sarbanes-Oxley Act regulations aim to catch such mistakes earlier and provide avenues for audit firms to issue warnings about company controls [12] - Experts suggest that Macy's may face a material weakness in internal controls due to this incident [13]