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Fresh inquiry into Tesco accounts as suppliers come under spotlight

Published:  22 December, 2014

The Financial Reporting Council has launched an investigation under the Accountancy Scheme into Tesco accounts for 2012, 2013 and 2014.

Tesco Watford Post-RenovationTesco suppliers to face questions as another investigation launches into the retailer

The inquiry comes as the Daily Telegraph revealed over the weekend that a number of Tesco's major consumer goods suppliers, including Diageo and Unilever, would face questions from the Serious Fraud Office as part of that investigation.

Tesco has been under fire over its £263 million misstated profits since September this year, with investigations focusing on accounting practices, and whether certain supplier fees were accounted for in the correct periods.

The FRC said it will look closely as the preparation, approval and audit of Tesco's accounts for the financial years ended February 25, 2012; February 23, 2013; and February 22, 2014 and its conduct in relation to the matters reported in the company's interim results for the 26 weeks ended August 23, 2014.

It is understood that a number of leading UK suppliers will be scrutinised by the SFO in January - with key staff working on Tesco's account interviewed and paperwork reviewed.

Speaking to back in October, Andrew Marsden, a veteran of the supply trade who has held senior marketing roles in Britvic and Danone and now works as a retail and marketing consultant, said suppliers would "inevitably be drawn in" to the investigation, and would face questions about why they didn't complain about non-compliance and why they paid fees upfront."

In the past fortnight, along with announcing a profits warning, Tesco chief executive Dave Lewis said the supermarket was "rebasing" its relationship with suppliers, and would be scrapping retrospective fees. While some suppliers said the move boosted transparency, David Sables, chief executive of Sentinel Management Consultants, which advises suppliers, said it would remove all of the incentives agreed through business plans and "take a blunderbuss approach to the single variable of price - that's very old-fashioned."

Four senior Tesco executives, originally suspended by the retailer during the course of the investigation, have now left the business permanently. Another, Matt Simister, head of food sourcing, returned to the supermarket earlier this month. A further member of the food sourcing team was suspended last week, although has not been named. Dan Jago, global director of beers, wines and spirits, remains suspended.

Remind yourself of key events at Tesco since the news broke with this brief analysis.