Belfast Telegraph

Watchdog launches probe into profits scandal at Tesco

By John-Paul Ford Rojas

The accounting watchdog has launched an investigation into a £263m overstatement of profit expectations at Tesco.

A probe by the Financial Reporting Council (FRC) will focus on financial figures reported and prepared by the UK's biggest supermarket and its auditor, PwC.

The scandal is already being investigated by the Serious Fraud Office and has seen a number of Tesco executives suspended - some of whom have now left. Chairman Sir Richard Broadbent has also announced he is to step down.

Tesco first announced in September that it had discovered an accounting problem relating to expected results for the first half of the current financial year.

A subsequent probe by Deloitte into the affair, which involved rebates from suppliers being moved to different periods on the company's balance sheet, found it had been going on at least as far back as the 2012/13 period.

The FRC has already said it was "giving careful consideration" as to whether it should take regulatory action.

Today the body said it had launched a probe "in relation to the preparation, approval and audit" of Tesco's financial statements in the financial years ending in 2012, 2013 and 2014.

It will also cover "conduct in relation to the matters reported in the company's interim results" for the first half of the current financial year - when the Deloitte probe was published.

The investigation will cover members of professional accountancy bodies, from either Tesco or its auditors, who were involved with the accounts, as well as the member firm, PwC, which was and remains Tesco's auditor.

PwC said in a statement: "We take our responsibilities very seriously and remain committed to delivering work to the highest professional standards. We will co-operate fully with the FRC in its inquiries."

A Tesco spokesman said: "We note the Financial Reporting Council is launching an investigation into individuals and a member firm in relation to the preparation, approval and audit of our accounts for the last three years. We will provide support to the FRC's investigation."

It is the latest challenge facing the supermarket, coming a couple of weeks after it issued a £500 million profits warning - its fourth this year.

Tesco said earnings would be hit by investments in price and availability of its products as well as a shake-up of the way it handles its supply chain in the wake of the accounting scandal.

Chief executive Dave Lewis has temporarily taken charge of its UK operations during its key Christmas trading period. Sales have been squeezed amid a price war spurred by the threat of discounters Lidl and Aldi.

Belfast Telegraph