While frantically searching for articles, I conveniently stumbled across a huge accounting blunder committed by Tesco* that was also overlooked by its external auditor PwC.
On Monday, 22 September 2014, Tesco was forced to admit a major accounting error which resulted in overstating first-half profits by £250m. It is suspected that this was due to the early booking of commercial income and delayed recognition of costs. The “commercial manager” who found the error has been kept anonymous. Of course shareholders were first to the scene which resulted in a share price drop of nearly 13%.
Tesco has now appointed a new adviser, Deloitte, to investigate the issue. Interestingly Deloitte will be working closely with Freshfields, its external legal advisers. After reading between the lines a Bernstein analyst, Bruno Monteyne, states that including Freshfields “implies there is potential foul play, beyond simple account stretching.”
Below is the link to a Reuters article which provides all the necessary information:
The following link provides the comments made by various analysts:
Finally the last link provides a brief overview of a few accounting blunders we have seen in the past as well as Tesco’s:
*For those who don’t know “Tesco PLC is a multinational grocery and general merchandise retailer headquartered in Cheshunt, Hertfordshire, England, United Kingdom.”