Macy’s has revealed a significant internal control lapse after discovering an employee concealed $154 million in expenses over several years.
The retailer announced on Thursday its financial reporting processes were deemed ineffective as of February 3, 2023, following a re-evaluation prompted by the discovery.
The incident delayed the company’s third-quarter earnings report, which was rescheduled to December 11.
Discovery and Findings
The issue came to light in late November, when Macy’s initiated an internal review after identifying discrepancies in financial records.
The investigation revealed an employee had been hiding expenses, exposing material weaknesses in the company’s financial controls.
They are no longer with the company.
Macy’s CEO Tony Spring and CFO Adrian Mitchell, under the board’s supervision, conducted a comprehensive review of the company’s financial reporting and internal controls.
The findings highlighted ineffective record maintenance and a failure to detect the irregularities in a timely manner.
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Impact on Financial Reporting
The company acknowledged the material weakness compromised its ability to produce accurate financial statements.
While Macy’s has not indicated any restatements of past financial results so far, it emphasized the need for immediate action to restore confidence in its financial reporting.
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Steps Toward Improvement
Macy’s stated it is implementing measures to address the identified weaknesses. These include:
- Strengthening internal controls: Enhancing processes for maintaining financial records and monitoring expense reporting.
- Employee oversight: Increasing supervision and accountability in financial operations.
- Ongoing evaluations: Establishing mechanisms to prevent future misreporting.
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Looking Ahead
The discovery underscores the importance of robust financial controls in safeguarding corporate integrity.
As Macy’s works to address these issues, the company will aim to reassure investors and stakeholders of its commitment to transparency and accountability.
The retailer is expected to provide additional updates on its remediation efforts during the rescheduled third-quarter earnings call on December 11.
