FRC announces closure of Tesco investigation
News types: Investigations
Published: 8 June 2020
The Financial Reporting Council (FRC) today announces the closure of its investigation into accountants working within Tesco relating to Tesco PLC’s (Tesco) overstatement of profit of approximately £250m as announced to the market in September 2014.
The investigation commenced in December 2014 with the following scope:
“The conduct of Members and a Member Firm in relation to the preparation, approval and audit of the financial statements of Tesco plc for the financial years ended 25 February 2012, 23 February 2013 and 22 February 2014 and the preparation, approval and review of financial information relating to the 26 weeks ended 23 August 2014 leading to the publication of the company’s interim results on 23 October 2014.”
The FRC previously closed the investigation into Tesco’s former Chief Financial Officer in August 2016 and its former auditors in June 2017 .
During the course of the wider investigation, a number of accountant employees within Tesco were added as subjects. The investigation into these individuals was subsequently paused pending the Serious Fraud Office’s (SFO) trial of three (non-accountant) senior Tesco employees on charges relating to the overstatement.
Following the conclusion of the SFO proceedings, and consideration of relevant material and information subsequently obtained from the SFO, Executive Counsel has decided to discontinue the matters in relation to each of the remaining subjects. Accordingly, the matter has been closed without service of a Formal Complaint.
Notes to editors:
- The FRC’s purpose is to serve the public interest by setting high standards of corporate governance, reporting and audit and by holding to account those responsible for delivering them. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
- Past FRC Enforcement Outcomes can be found here.
- The FRC is the independent, investigative and disciplinary body for accountants and actuaries in the UK dealing with cases which raise important issues affecting the public interest. In brief, the stages of the disciplinary process under the Accountancy Scheme are:
- Decision to investigate
- Investigation
- Decision whether to bring enforcement proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal
- Tribunal hearing
- Determination and imposition of sanction and/or costs orders
Under the Accountancy Scheme the FRC can start a disciplinary investigation in one of two ways: (i) the professional bodies can refer cases to the FRC; and (ii) the FRC may decide of its own accord to investigate a matter. The Conduct Committee will consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.
The criteria are specified in paragraph 5(1) of the Accountancy Scheme. A Member or Member Firm shall be liable to investigation under this Scheme only where, in the opinion of the Conduct Committee the matter raises or appears to raise important issues affecting the public interest in the United Kingdom and there are reasonable grounds to suspect that there may have been Misconduct or it appears that the Member or Member Firm has failed to comply with any of his or its obligations under paragraphs 14(1) or 14(2) of the Scheme.
Investigations are conducted by Executive Counsel and the Enforcement division.
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