A Case Study on Audit Failure of Macy’s
Jiayi Wang
Co-Presenters: Yulin Ren
College: College of Business and Public Management
Major: Accounting
Faculty Research Mentor: Hanxin (Alice) Hu
Abstract:
Title: The $151 million accounting error at Macy's: Lessons in Internal Controls and Financial TransparencyAuthor: Jiayi Wang, Department of Accounting and Finance, Kean UniversityYulin Ren, Department of Accounting and Finance, Kean UniversityHanxin Hu (Faculty Advisor), Department of Accounting and Finance, Kean UniversityAbstract:Recently, retail competition has increased, and the public has paid close attention to the financial health of retailers. Macy's, one of the most famous retailers, was audited for hiding $151 million in distribution costs. To understand why this event occurred, how its finances were affected, and why internal controls failed, this study examines this event. To understand why, how, and what happened, we will review Macy's Investor Relations reports, official statements, and news reports. As a result of our study, Macy's had problems tracking expenses and did not have enough ways to verify these expenses. Employees were able to hide a lot of costs for a long time. This event resulted in the company losing money and making less money in the future, showing an inadequate internal control system. In this study, it was noted that retail companies needed to strengthen internal controls and make their financials more transparent. It also hurt the company's reputation. In order to avoid similar risks in the future, retail could develop a better internal audit system.Keywords：Macy's, Accounting Fraud, Internal Controls, Financial Transparency, Retail Industry