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Akiel Hunte
10/30/17
Principles of Accounting
Leslie Fay’s inventory fraud was the result of poor internal control. Leslie Fay made
more than $81 million in accounting adjustments to its 1990- 1992 financial statements to rectify
false entries of understated inventories, which resulted in the overstatement of their gross profit.
The senior executives were too hasty when analyzing the company’s invoices.
Donald F. Kenia, the corporate controller of Leslie Fay at the time, caused the net income
portrayed in the income statement and the balance sheet to come out larger than the actual gross
profit. “Ultimately, the controller admitted to investigators that he had pumped up orders by
counting merchandise shipped without subtracting returns. This allowed the gross-margin reports
