Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interests
DOI:
https://doi.org/10.18311/sdmimd/2016/8410Keywords:
Fraud, Accounting Misstatements, Internal Control, Corporate Governance.Abstract
This case study explores what went wrong in Tesco that resulted in the fraud of accounting misstatements of the magnitude of £263 million, why the fraud remained undetected over a number of years, which resulted in catastrophic consequences for both Tesco and its stakeholders. Furthermore, it highlights the lessons learnt from this debacle in Tesco, with focus on enterprise risk management, change management, corporate governance, materiality of transactions from accounting perspective, auditors' independence, sound accounting practices, internal controls and, employees' incentives policies. Finally, while the ultimate price of these scandals is paid by the society at large - particularly stockholders who put their hard earned savings in these institutions just on the basis of their trust on them - and while such scandals are often attributed to gaps in internal controls and auditors' negligence, this study concludes that, whatever controls are put in place or whatever accounting and reporting standards are set, if the people who are the part of system themselves decide to bypass the control systems, it is next to impossible to prevent such fraudulent activities. This case study has been prepared for educational purposes based on public available sources such as newspapers, magazines, websites and other referred articles.Downloads
Metrics
References
Accountancyagecom. (23 October 2014). Retrieved 15 July, 2015, from http://www.accountancyage.com/aa/news/2377371/deloittes-tesco-probe-finds-priorreporting-period-issues
BBC News. (19 January 2015). Retrieved 5 July, 2015, from http://www.bbc.com/news/business-30886632
BBC News. (22 October 2014). Retrieved 8 July, 2015, from http://www.bbc.com/news/business-29716885
BBC News. (22 September 2014). Retrieved 2 July, 2015, from http://www.bbc.com/news/business-29306444
BBC News. (23 October 2014). Retrieved 15 July, 2015, from http://www.bbc.com/news/business-29735685
BBC News. (9 September 2013). Retrieved 2 July, 2015, from http://www.bbc.com/news/magazine-23988795
Business Insider. (2 October 2014). Businessinsidercom. Retrieved 12 July, 2015, from http://www.businessinsider.com/r-tescos-250-million-pound-black-hole-who-wasminding-the-shop--2014-10
Business Insider. (23 October 2014). Retrieved 15 July, 2015, from http://www.businessinsider.com/tesco-results-profit-collapse-2014-10 Financial Reporting Council. (22 December 2014).
Frcorguk. Retrieved 20 July, 2015, from https://www.frc.org.uk/News-and-Events/FRC-Press/Press/2014/December/Investigation-announced-in-connection-withthe-pre.aspx
Financial Times. (23 October 2014). Retrieved 20 July, 2015, from http://www.ft.com/intl/cms/s/0/ce49c8a4-5a7b-11e4-b449-00144feab7de.html
Financial Times. (8 June 2010). Wwwftcom. Retrieved 6 July, 2015, from http://www.ft.com/intl/cms/s/0/34ed145a-72cb-11df-9161-00144feabdc0.html?siteedition=intl
Irish Times. (23 September 2014). Retrieved 21 July, 2015, from http://www.irishtimes.com/business/retail-and-services/tesco-in-turmoil-as-first-half-profitsoverstated-by-250m-1.1938003
Retail week. (11 May 2015). Retrieved 20 July, 2015, from http://www.retail-week.com/home/breakfast-briefing-retail-news-on-tesco-shop-direct-and-ms/5074826.article
Reuters. (31 October 2014). Retrieved 20 July, 2015, from http://uk.reuters.com/article/2014/10/31/uktesco-ratings-idUKKBN0IK1KK20141031
Tesco. (2015). Tesco Annual Report 2014-15. Retrieved 10 July, 2015, from http://www.tescoplc.com/files/pdf/ reports/ar15/download_annual_report.pdf
The Guardian. (1 March 2015). Retrieved 20 July, 2015, from http://www.theguardian.com/business/2015/mar/01/ warren-buffett-admits-thumb-sucking-over-tesco-costhim-444m
The Guardian. (25 November 2014). Retrieved 20 July, 2015, from http://www.theguardian.com/business/2014/ nov/25/uk-firm-tesco-shareholders-lawsuit-stewartslawcompensation-profits-scandal
The new york times. (14 October 2014). Retrieved 15 July, 2015, from http://www.nytimes.com/2014/10/15/business/international/tesco-suspends-3-more-executives.html?_r=0
The Telegraph. (14 February 2015). Retrieved 20 July, 2015, from http://www.telegraph.co.uk/finance/newsbysector/ retailandconsumer/11412403/Tesco-to-cut-up-to-10000jobs.html
The Telegraph. (14 October 2014). Retrieved 8 July, 2015, from http://www.telegraph.co.uk/finance/newsbysector/epic/tsco/11161452/Tesco-suspends-threemore-executives.html
The Telegraph. (20 December 2014). Retrieved 20 July, 2015, from http://www.telegraph.co.uk/finance/newsbysector/ epic/tsco/11305170/Tesco-suppliers-dragged-into-SFOinvestigation.html
The Telegraph. (24 October 2014). Retrieved 20 July, 2015, from http://www.telegraph.co.uk/finance/newsbysector/ epic/tsco/11187395/Tesco-shares-hit-11-year-low-as-asretailer-hit-by-double-whammy.html
The Telegraph. (29 October 2014). Retrieved 20 July, 2015, from http://www.telegraph.co.uk/finance/newsbysector/epic/tsco/11195376/Tesco-to-beinvestigated-by-Serious-Fraud-Office.html
The Wall Street journal. (6 December 2012). Retrieved 2 July, 2015, from http://www.wsj.com/articles/SB1000124127887324640104578160514192695162
This is money. (8 May 2015). Retrieved 21 July,2015, from http://www.thisismoney.co.uk/money/markets/article-3073878/Tesco-embroiled-rowhundreds-thousands-employees-plans-make-savagecuts-pays-pensions.html