Here’s one of the stranger recent entries from the annals of internal control breakdown, as reported by the New York Times:

• Macy’s said on Monday that an employee had “intentionally” misstated and hidden up to $154 million in delivery expenses over the past few years, forcing the retailer to delay a much-anticipated earnings report that Wall Street uses to gauge the strength of holiday shopping.
• The employee did not take money from the company, a person familiar with the matter said, but the company delayed releasing its full quarterly financial results until it completes an investigation.
• The department store chain rushed to release abridged results, which were a mixed bag, with signs of weakness and pockets of strength.
• Macy’s shares fell more than 8 percent in premarket trading after the surprise preliminary report. But it quickly pared back some of its losses, as investors tried to make sense of the mixed results along with the company’s reassurance that the employee error, which Macy’s said spanned the fourth quarter of 2021 through the most recent quarter, did not affect its cash flow management or vendor payments…
• Macy’s said it had found the accounting error while preparing its results for the quarter, which ended Nov. 2. The results had been set to be released on Tuesday. An investigation was opened, and the employee, who was responsible for small package delivery expense accounting, is no longer with the company, Macy’s said. The investigation has not identified involvement by any other employee.
• In the same three-year period of the accounting issue in which the employee hid up to $154 million, the retailer said it had recorded about $4.36 billion in delivery expenses — the cost to a business in order to transport goods. Macy’s declined to comment further. A spokesman for KPMG, Macy’s auditor, declined to comment…

The article provides the following commentary:

• “It is so strange because I’m trying to imagine why an accountant, who’s responsible for this small package delivery expense account, would do this,” said Blake Oliver, a certified public accountant and founder of the mobile app Earmark. “It doesn’t make sense to me. Could it have been a mistake? Could they have been making the wrong journal entry for years and it just went completely unnoticed? It’s a mystery.”
• “This just is strange because I don’t see a motive,” he said.

Indeed, I’m sure not the only one who initially assumed on seeing the headline that the story would be about the creation of fictitious invoices as a vehicle for theft (some of the reporting in other publications was fuzzy enough that one might have read the story without realizing that wasn’t the case). As in all such cases, and as articulated by Oliver, one would certainly like more detail on actually went on (maybe it’ll be provided soon – Macy’s indicated they’ll report earnings by December 11th). In its absence, various commentators (many pouncing on the opportunity to do some self-marketing, and why not) posited that the story may have something to tell us about the competence of Macy’s auditors, about the ongoing shortage of accountants, and of course about internal control and corporate culture, for instance:

• How could such an extensive manipulation go undetected for so long? What internal checks failed to identify these discrepancies? These inquiries highlight the crucial role of vigilant oversight in financial operations.
• Fraudulent schemes like this one often thrive on a lack of transparency and weak auditing practices. In this instance, the ability to fabricate and submit false invoices points to potential shortcomings in Macy’s expense reporting systems. While larger companies typically implement rigorous financial protocols, no system is entirely immune to exploitation.
• Moreover, the psychological aspects behind such actions are worth examining. The transition from regular employee to perpetrator often involves a rationalization process—a slippery slope that begins with small missteps. This underscores the need for organizations to foster a strong ethical culture and provide training that emphasizes the importance of integrity.
• Moving forward, Macy’s and similar corporations will likely reassess their internal controls and implement enhanced training programs to prevent the recurrence of such incidents. It is crucial for businesses to proactively address vulnerabilities and reinforce a sense of accountability among employees…

Fair enough, but none of that can ever entirely eliminate any possibility of fraud or error, and I think the strangeness of the incident makes it hard to conclude, for now at least, that Macy’s were notably weak or deficient in any of the noted areas. Perhaps if the perpetrator’s motives were more straightforwardly malign or self-serving – to steal money, being the most obvious one – he or she would never have gotten away with it for anything like this long. Or maybe I’m just saying that in a spirit of (American) Thanksgiving-prompted tolerance. Because as President Biden just reminded us again, sometimes you just have to pardon the turkey…

The opinions expressed are solely those of the author.