Tesco, one of Britain’s largest grocery companies has added another case to its series of recent accounting mishaps. An overstatement of 250 million pounds in profit happens to be just one of three accounting warnings Tesco has had in the past few months. With Tesco stock shares going down to a low they have not seen in over a decade, newly acquired Chief Executive Dave Lewis evidently has more on his plate than he had hoped for.
The Tesco case brings up ideas discussed in class involving fraudulent financial reporting and why some financial reports are intentionally prepared incorrectly. Tesco’s position as the biggest under performer among Britain’s top four grocers puts pressure on Tesco to improve business. Weak internal controls causing flawed documentation and pressure from investors may have played a part in Tesco’s inaccurate accounting disclosure.
It will be interesting to see what the FCA and Tesco’s own independent investigation find. Dave Lewis certainly is in a tough position having been left with a mess he did not make, but if fraudulent activity is eminent, while it would not be surprising, the scandal could be the ultimate demise for Tesco as a player in the top grocer market.
Source:
http://uk.reuters.com/article/2014/10/01/uk-tesco-probe-idUKKCN0HQ33L20141001