UK accountancy watchdog to monitor Tesco

The UK's accountancy watchdog has stated that it will be monitoring Tesco after the supermarket overstated its half-year profit guidance.

The Financial Reporting Council (FRC) said that it was looking into the current situation at one of the UK's biggest retailers, but stated that it would not act until Tesco has completed its own investigation. The supermarket has appointed Deloitte to independently investigate how half-year profits were overstated by £250 million.

Tesco, which is the world's third biggest retailer, was forced to suspend the head of its UK operations and three other senior executives after it discovered accounting errors in supplier contracts. It has since opened an internal investigation and the FRC explained that it will be monitoring the situation, but maintained that it will not be looking at or requiring restatement of unaudited trading statements.

In a statement, the FRC said: "It will consider the outcome of the investigation announced by the company and determine whether it should take regulatory action."

UK business secretary Vince Cable explained that the FRC will be called in to investigate Tesco if the supermarket is found to have conducted "serious malpractice". This could take place once the retailer has concluded its own internal investigation.

Tesco has been put under increased pressure in recent months with the rise of discount grocery chains such as Aldi and Lidl. Both retailers have been gaining a bigger share of the market and it raised competition among the more traditional names within the supermarket sector.

The likes of Asda and Morrisons have been forced to make redundancies while Sainsbury's has launched a project to bring Netto back to the UK.

Speaking about the overstatement of profits, Dave Lewis, chief executive of the Tesco Group, said: "The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear."

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