Ace Employee Makes $152 Million Accounting Blunder

Ace Hardware Corp. discovered an error in the company’s historical financial statements last summer. Based on the most current information available, there is a difference between the company’s 2006 general ledger balance (the company’s primary method for recording financial transactions) and the perpetual inventory balance (actual inventory records) – that amounts to approximately $152 million.

Upon discovering the issue, Ace immediately hired Protiviti Inc., an independent consulting firm with significant expertise in inventory reconciliation matters, to help identify the exact cause, extent of and solution to this problem.

Chief executive officer Ray Griffith told Crain’s Chicago Business (CBB), “The company expects to release restated earnings for the years between 2003 and 2006 by the end of February. The company also is reorganizing its procedures for handling its balance sheets, implementing new staff training and upgrading its technology.”

“We have a remediation plan that assures that this issue never happens again,” Griffith told CCB.

“To restore the shortfall, the company has created variance allocation accounts for each of the 3,100 owners in which 20 percent of the so-called “patronage dividend” — a profit-sharing plan for owners — would be paid in cash. The remainder of that dividend would be in Class C stock which would go into an account and accumulate until the dealer’s portion of the overstatement is paid back,” CBB reported.

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