The independent watchdog for UK accountants will scrutinise the retailer’s accounts for 2012, 2013 and 2014. Included in the investigation will be the conduct of accountancy firm PriceWaterhouseCoopers (PWC) in the auditing of Tesco’s accounts.
This latest investigation follows a decision by the Serious Fraud Office (SFO) last month to probe accounting irregularities, which led the supermarket to overstate its first-half profits by £263M. In September, Tesco admitted overstating its half-year profits by £250M but subsequently revised the figure up by £13M.
Serious Fraud Office
Eight senior executives were later suspended. One has been reinstated and others have left the business. Tesco chairman Sir Richard Broadbent has announced his intention to step down.
Commenting on the latest investigation, a Tesco spokesman told FoodManufacture.co.uk: “We note the Financial Reporting Council is launching an investigation into individuals and a member firm [PWC] 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.”
A statement from PWC read: “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’s investigation.”
The FRC’s investigation will cover “the preparation, approval and audit of the financial statements of Tesco PLC”. Under close investigation will be matters relating to the company’s interim results for the 26 weeks ended 23 August 2014.
Guilty of wrongdoing
Its investigation is expected to last about a year, while the SFO inquiry could take up to two years. If the FRC found evidence of malpractice, it could impose unlimited fines; order the payment of unlimited costs; and strike off any individual proved to be guilty of wrongdoing.
Meanwhile, earlier this month Tesco posted another profit warning, declaring that its full-year expectations will be significantly below expectations. Profit for the year ending February 2015 will not exceed £1.4bn, it said, compared with market expectations of between £1.8–£3.2bn.
In a statement delivering the profit warning Tesco boss Dave Lewis pledged the retailer would continue to focus on its customers. “This means running our business in a way that everything we do creates sustainable value,” he said.
Tesco shares have plummeted in value by more than 40% over the past year, as investors railed at the news of accounting irregularities and shoppers deserted the store for discounters Aldi and Lidl and posh food retailers Waitrose and Marks & Spencer.
Read more about the FRC probe here.