The FRC was investigating McIlwee after it emerged in 2014 that the company had been overstating its profits in its accounts stretching back to 2012. McIlwee resigned his position as chief financial officer in April 2014, five months before the revelations emerged.
"There is no realistic prospect that a tribunal would make an adverse finding in relation to the conduct of Mr Laurie McIlwee," the FRC said.
McIlwee was never formally outed as being under investigation, but the FRC said in December 2014 that it had started to look into "members and a member firm in relation to the preparation, approval and audit of the financial statements of Tesco".
The wider investigation into Tesco is ongoing, the FRC said. The Serious Fraud Office is also still investigating the accountancy discrepancies that led Tesco to overstate its profits by more than £263m.
Tesco's chief executive Dave Lewis - who took the helm in September 2014, shortly after the accounting scandal erupted - has been focusing on turning the business around.
Several board members have been replaced, including chairman Richard Broadbent, and the company has been offloading unwanted assets such as its Giraffe restaurant chain.
Tesco declined to comment.