The UK’s Financial Reporting Council (FRC) has launched an investigation into the work of PwC as external auditor to Tesco, as the accounting scandal surrounding the UK grocery giant appears far from over.
The investigation centres on the preparation, approval and audit of the financial statements for the financial years ended 25 February 2012, 23 February 2013 and 22 February 2014.
While the examination of the preparation, approval and internal audit will pertain to Tesco, the external audit investigation will centre on PwC conduct as the company’s auditor.
The FRC’s announcement marks the latest development in an ongoing accounting scandal which engulfed Tesco throughout the second half of 2014 and now looks to be threatening the business’s long-standing auditor, PwC.
A £250m ($408m) first-half profit overstatement was discovered in August, leading to the company being placed under investigation first by the Financial Conduct Authority (FCA) and then by the Serious Fraud Office (SFO).
A review by Deloitte into the accounting errors found the overstatement to be both larger than initially thought, at £263m, and that similar blunders had occurred in previous financial years.
The revelations led to the dismissal of eight executives amid plummeting trading figures for the retailer and sparked industry-wide criticism of the "aggressive" accounting practices manifested by what appears to be a long-term policy of account stretching.
Amidst mounting backlash against the struggling UK grocer in what remains a high-profile case, the FRC’s decision to investigate has not come as a surprise.
At the end of September it announced it would be "monitoring" the events following the overstatement as it decided whether to exercise the disciplinary powers it holds in relation to accounting misconduct.
Commenting on the announcement today, a spokesperson for PwC said the firm intends to cooperate fully with the FRC in its enquiries and added: "We take our responsibilities very seriously and remain committed to delivering work to the highest professional standards."
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