Tesco accounting errors under UK’s Serious Fraud Office scanner

The UK's Serious Fraud Office (SFO) has launched a formal criminal investigation into accounting errors at Tesco, increasing the stakes in a scandal that had severely dented the reputation of the country's biggest grocer, Reuters reported.

Tesco said yesterday, it had been notified of the investigation into the £263 million overstatement of its first-half profits that had led to the suspension of eight senior staff members as it prepared to take on yet another challenge.

The company was already facing a proposed investor lawsuit in the US over the accounting irregularities from booking deals with suppliers too early.

The UK's accounting watchdog, the Financial Reporting Council, was also examining how the error came about.

Shares in Tesco, that had been up about 2 per cent all day, retreated initially on the news by half a percent before recovering to close up 2 per cent at 172 pence.

Meanwhile, investigation agency said in a statement, "The SFO confirmed it had opened a criminal investigation into accounting practices at Tesco plc."

The accounting errors led to suspension of eight senior members of staff. According to  Tesco, they remained employees and had been asked to step aside while the matter was being investigated, adding that there was no suspicion of wrongdoing.

The Independent reported citing accountants Deloitte and law firm Freshfields, appointed by Tesco, the accounting error was worse than initially believed and the supermarket had been overstating its earnings for some years.

Tesco said it had been co-operating fully with the SFO and would continue to do so.

According to commentators, the SFO's decision to launch a full criminal investigation – which could take years in certain cases meant that it was satisfied that there were reasonable grounds to suspect serious or complex fraud or bribery.

The agency was likely to take months sifting through vast quantities of digital data and other evidence, while it sought to identify and trace witnesses.

The retailer's new chief executive, Dave Lewis, unveiled the overstatement just three weeks after he started work on the huge task of turning around the company's fortunes.

The figure was higher than the £250 million initially feared, although Lewis insisted last week at the firm's half-year results that there was no evidence of wrongdoing from the accounting error.