Oopsie

From the Chicago Sun-Times:

Ace employee makes $152 million accounting error
BY SANDRA GUY
Ace Hardware discovered that a mid-level employee made innocent but enormously expensive and incorrect entries in ledger books that eventually led to a $152 million accounting error, Ace Hardware CEO Ray Griffith said today.
The poorly trained employee, who worked in the finance department at the co-op’s headquarters in Oak Brook, is no longer employed at Ace Hardware, Griffith said.
The accounting error initially was revealed last summer.
Ace Hardware will be forced to restate its earnings for fiscal years 2004, 2005 and 2006, and will correct its numbers for fiscal 2007.
Investigators hired by Ace Hardware’s board of directors told the board of their findings Tuesday, and Griffith revealed the situation to Ace Hardware store owners today. The five-month investigation cost roughly $10 million.
The unidentified employee, who had worked at Ace Hardware for at least eight years, made journal entries of a “sizeable amount” that “masked” a difference in numbers between two ledger books.
The ledgers looked as though they were reconciled, but were not.
The journals are the general ledger and the perpetual inventory journal.
“Numbers were flowing through one of the ledgers but not flowing into the other,” Griffith said.
About 25 percent of the error, or $34.6 million, dates back to 1995, Griffith said. The remainder, $117.4 million, occurred from 2002 through 2006.
The employee did nothing fraudulent, and no inventory or money is missing, Griffith said.
The person was not properly trained or equipped to do the job, and Griffith conceded that that was Ace Hardware’s fault.
“We are embarrassed by it,” Griffith said. “We did not provide the training, oversight or checks and balances to help that person do [his or her] job,” Griffith said. “[The employee’s] only intent was to try to do the best job for the boss and for our company.”
Part of the problem is the increasingly complex and competitive situation that hardware stores face, Griffith said.

Posted by Eddy on January 12th, 2008 at 1:16 pm

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