Tesco faces investigation by Financial Reporting Council over profit blackhole

Lynsey Barber
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Tesco faces fresh investigation (Source: Getty)

Tesco is facing an investigation by another City regulator over its auditing practices which have come under scrutiny following the revelation of a £263m profit blackhole.

The Financial Reporting Council (FRC) will look at the “preparation, approval and audit” of Tesco’s financial statements for the last three financial years stretching back to 2012.

The investigation will include looking at the auditing of Tesco's accounts by the supermarket's accountancy firm PWC, a member firm of the FRC.

PWC said in a statement: "We take our responsibilities very seriously and remain committed to delivering work to the highest professional standards. We will cooperate fully with the FRC in its enquiries".

The FRC monitors corporate governance and reporting, accountants and actuaries, and has powers that can require a company to restate its financial statements through the Financial Reporting Review Panel as well as imposing fines.

Previously the FRC had said it was "closely monitoring" the situation and was awaiting the outcome of Tesco's own investigation into the matter.

The supermarket is also facing probes from the Serious Fraud Office and the Financial Conduct Authority into the reporting error which caused profits to be overstated by £250m in September, The figure was later revised up to £263m.

Tesco's latest guidance on full-year profit, its first since the mis-reporting revelation, came in at £1.4bn- £1bn less than its previous estimate after a profit warning in August.

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