02 October 2014
Tesco has been notified by the Financial Conduct Authority (FCA) that it is being investigated by the regulator for overstating its profit.
Last week, Tesco admitted that it had overstated the Group’s profit for the first half of 2014 by £250 million, which would amount to a quarter of the profit. Tesco claimed that this was a result of taking commercial income into account without recognising operating costs.
Tesco states that it is ‘[co-operating] fully with the FCA and other relevant authorities considering this matter’. Deloitte is also conducting an independent review of Tesco’s accounts alongside Tesco’s external legal advisors Freshfields.
The Financial Reporting Council (FRC) states that it is ‘monitoring the situation’ closely and will consider the outcome of the investigation announced by the company and determine whether it should take regulatory action.The FRC also adds that it has disciplinary powers in relation to misconduct by accountants and, through the Financial Reporting Review Panel, can also require a company to restate its financial statements. However, it does not have powers to monitor or require restatement of unaudited trading statements.
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