“What has been disclosed is that cash flows are not impacted, just the P&L. This leads me to hypothesize that the accountant changed the coding of these delivery transactions to charge the payments to a balance sheet account versus a P&L account. As a result, while the payments were appropriately recorded as cash outflows payments, the expense was never reported,” Carpenter said. “This coding could have happened at the time the transaction occurred, meaning it was tied to the transaction itself, or it could have been initially recorded to the P&L and a second journal entry was then posted to reverse the charge and move it to the balance sheet.”
Carpenter suggested that enterprises could prevent this with some procedural changes. Accounting could require that purchases have to be approved and an account code assigned “before the spend or transaction occurs. In this scenario, when the transaction actually happens, it has already been pre-assigned to be recorded as a P&L expense. That would prevent someone coming in and putting in another account coding, such as to a balance sheet account.”
Frank Dickson, the group VP of security and trust at IDC, was one of the few who thought that the employee’s actions likely went beyond aggressive accounting and were criminal. And he speculated that the lack of a reference to law enforcement was merely to allow Macy’s to control the situation a little bit longer.
