US department store giant Macy’s has said that it had “identified a material weakness in its internal control over financial reporting” upon investigating an incident in which an employee allegedly hid around 151 million dollars of cumulative delivery expenses.
The discovery was revealed in the company’s latest financial statement, in which it stated that it would be delaying the publication of its Q3 results as it launched an investigation into the matter.
The incident, according to Macy’s, involved a singular employee, no longer with the company, who “intentionally made erroneous accounting entries and falsified underlying documentation, to understate delivery expenses from the fourth quarter of 2021 through the third quarter of 2024”.
Macy’s said the material weakness had resulted in errors, which are to be revised in its historical consolidated financial statements, that came as a result of “deficiencies in the design of controls over delivery expense and certain other non-merchandise expenses”, with the design of controls not considering the potential for employee circumvention.
The total misstatement to delivery expense for the first half of fiscal 2024 amounted to around nine million dollars, which Macy’s said was adjusted during the third quarter of 2024.
Macy’s underlined that the related impact was not material to results of operations or financial position for any historical annual or interim period, including in the way of net sales or trends in profitability.
The company added it was “committed to addressing the material weaknesses” and has already begun to implement changes to improve internal control, including re-designing process level control activities to respond to the risk of employee circumvention of control.
