99

DOI :
10.15533/sdm/2016/v7i1/90217

Tesco Accounting Misstatements: Myopic Ideologies

Overshadowing Larger Organisational Interests
Gagan Kukreja1* and Sanjay Gupta2
1
Associate Professor of Accounting, College of Business & Finance, Ahlia University,
Kingdom of Bahrain
2
Head of Reserve Risk Control, Central Bank of Bahrain, Kingdom of Bahrain

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.

Keywords: Fraud, Accounting Misstatements, Internal Control, Corporate Governance

1. Introduction serious questions on corporate governance, financial
reporting practices, internal controls and auditing
On September 22, 2014 Tesco, the super market giant standards.
in the United Kingdom, admitted that its profits for the
six months ending on the 23rd of August 2014 were
overstated by an estimated £250 million. Shares of
2. Key Events: Timeline
Tesco tumbled to an 11 year low, wiping out almost £2 1919 Tesco was founded from a market stall in
billion from Tesco’s value. Four top executives were London’s East End by Jack Cohen. Over the
suspended including its UK managing director and an years Tesco’s business grew manifold and it
investigation covering the four past accounting years became the 3rd largest grocery and general mer-
was initiated by Tesco (BBC News, 22 September chandise retailer in the world. (BBC News, 9
2014). All in all, once again another fraud involving September 2013)
misstatements in the financials of one of the largest
and most reputed organizations in the world surfaced 2007 Tesco entered U.S. markets announcing ambi-
and once again investors’ trust shattered, raising some tious plans for hundreds of Fresh & Easy stores

*Email: profgagan@gmail.com
10 Gagan Kukreja
Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interestsand Sanjay Gupta
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(The Wall Street Journal, 6 December 2012).

Sir Terry Leahy had been the CEO of Tesco for
14 years. Under his management pre-tax profits
increased from £750 million in 1997 to £3.4 bil-
lion in April 2010. Tesco had become known as a
highly customer focused retailer and was known
as being the lowest price retailer in the “Big 4”.

2011 On February 28, Sir Terry Leahy stepped down as

Chief Executive and was replaced by Philip Clarke
(Financial Times, 8 June 2010). Under Philip
Clarke, Tesco purchased coffee shops, restaurants
and digital businesses as it expanded its services
into areas it thought might interest its customers.
He started a program to refresh stores, which he
claimed was bearing fruit, but this program focused
on large “out of town” outlets when consumers
were increasingly shopping at more convenient
locations and shopping more frequently. He also
cut the rewards for being a Club Card holder which
was one of Tesco’s key selling points.

2012 Tesco exited the U.S. market, which cost £1.0 bil-
lion (The Wall Street Journal, 6 December 2012).
The company started to lose market share. Philip
Clarke was criticized for allowing Tesco to lose
its reputation as the cheapest of the “Big 4” UK
supermarkets, a title that it lost to ASDA. “Hard
discounters” such as Aldi and Lidl were increasing
their market share drastically and more upmarket
retailers such as Waitrose also were gaining mar-
ket share. (BBC News, 19 January 2015)

2013 For the 2013/14 financial year, Tesco’s market

share sharply declined to 28.7% in the UK, the
lowest level in a decade. (BBC News, 22 October
2014)

2014 In July, Tesco announced that Mr. Clarke would

step down from the board on October 1 and
would be replaced by Unilever executive, David
Lewis who is already known to many people
inside Tesco, having worked with the business
over many years in his role at Unilever. Mr.
Lewis was asked to start early in September
because of what was happening in Tesco.

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2014 On September 19, the General Counsel briefed the
Chairman and CEO about the potential mis- statement in
profits.

3. How was the Fraud Detected?

On September 19, 2014, a whistle-blower, via the legal department,
brought to the attention of the new chief executive, Dave Lewis, the
fact that the company’s first-half profit estimate, announced on Aug.
29, might have been overstated by £246 million. The whistle-
blower, who was a member of the Finance Department, was
concerned that his department was not receiving the full
documentation related to commercial income. (BBC News, 22
October 2014)

The CEO and Chairman were briefed by Tesco’s

General Counsel on the situation. On September 22,
2014 Tesco announced the overstatement of profits. (BBC News,
22 September 2014)

As per the audited financial statements of Tesco for the year 2014-
15, the total overstatement of profit before tax for the year ended
22 February 2015 was £53 mil- lion and a total overstatement for
the years prior to that was £155 million. (Tesco Annual Report,
2015, p. 77, Independent Auditors’ Report)

4. What Went Wrong?

Various types of sales incentives and vendor allow- ances are
common in the Fast Moving Consumer Goods (“FMCG”) and
Retail sectors. These companies provide retailers and other
customers with different forms of vendor allowances. Examples of
such allow- ances can be:

• Cash in the form of volume discounts, and price

protection.
• Cooperative advertising and promotional allow- ances.
• Slotting fees – these are the fees for displaying mer- chandise in
more favourable locations, for example, at the plinth or an aisle
or at eye catching areas.
• Listing fees – it is estimated that Tesco charges com- panies
£80,000 simply to place a new product on their shelves.

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• Buy one, get one free promotions. million which Tesco was demanding and L’Oreal had disputed.
• Return of expired goods and allowance for shrink- (BBC News, 19 January 2015)
age.
• Late delivery penalties.

These deals are common practice in the supermarket

industry and, although not disclosed, are estimated to
account for one third of profits for the larger super-
markets. In the grocery industry, there is evidence
that these payments are sometimes taken unilaterally.
These payments may be disputed later, and a refund or
a new agreement entered into, but by then, the original
payment has been taken as revenue. Close to the end
of a reporting period, buyers were regularly asked to
“find” additional income, which; by implication meant
finding such commercial income that could be brought
forward. Tesco was too “ambitious” in forecasting
these rebates in the first half of its 2014/2015 financial
year and earlier years, and they may have manipulated
the figures to enhance income and meet targets. Due
to the size of these agreements, taking the income ele-
ment early increased income substantially and made
the meeting of targets significantly easier.

In a period where sales are rising and increased

amounts of revenue are being realized, moving profits
forward can be easily disguised, cloaked by increasing
revenues in the second half of the year. Any issues in
the first six months are “traded away”. This means that
the overstated profits could be hidden in the increased
profit that generally occurred in the second half of the
financial year. However, when sales are falling – as
they had been for a number of quarters at Tesco – mov-
ing profits forward caused problems. Therefore, when
the business was under strain, the manipulation was
detected. (Business Insider, 2 October 2014)

5. Why the Fraud was Initially

not
Detected?
There were warning signs that commercial income was
a problematic area. L’Oreal, one of the world’s larg-
est cosmetics company, was known to have threatened
Tesco with legal action and withdrawal of its products
from Tesco outlets due to a commercial income of £1

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The former Chief Financial Officer of • Shares in Tesco fell to their lowest level in 11 years
Tesco, Laurie McIlwee, sent an internal on the initial announcement of the accounting error/
email in 2012 warning employees about misstatement. This meant that the market capitaliza-
weaknesses in the company’s finan- cial tion of Tesco had almost halved in the space of a
controls after a problem was discovered year (The Telegraph, 24 October 2014). The impact
in its Polish business. The email told of Tesco stock falling in value is significant to many
finance staff: “You should be in no doubt people in the UK as Tesco was a share that many
as to the seriousness [of] miss- pension funds and mutual funds invested in.
declarations” and said that accounting for • Profits for the six months ending on the 23rd August
profits early was forbidden “where [the 2014, which were announced on the 23rd of October
profits] cannot be justified”. (BBC News, 2014, were down 91.9% to £112 million versus £1.3
19 January 2015) billion a year earlier. (The Telegraph, 24 October
2014)
During the 2013/14 year-end audit, PwC
had raised questions about “Commercial
Income Accounting”. They enquired how
this income from commercial deals from
suppliers was recognized (Business
Insider,
2 October 2014). This enquiry was the
third time that they had raised this issue
with Tesco, but the com- pany’s audit
committee had concluded that this area
was not a problem. Senior staff at Tesco
was highly incentivized to meet targets
and this incentive struc- ture may have
motivated them to manipulate figures to
meet targets.

6. The
Afterm
ath
The overstatement of profit has had a
substantial impact on Tesco, which was
already suffering due to falling sales
and profits. The following summarizes
the aftermath of the discovery of the
accounting error/ fraud:

• Tesco’s shares immediately declined

and closed the day 6.5% down after
the announcement (BBC News, 23
October 2014 & Business Insider,
23
October 2014).

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• The continued fall in profits at Tesco also had an Tesco was a huge mistake and
impact on the UK Treasury as Tesco was one of the announced that he
largest corporate taxpayers in the UK.
• Eight top executives were suspended (The
Telegraph, 14 October 2014). Four executives
remained suspended, one was reinstated and three
left the company. At the time of writing, the entire
top management team in Tesco has been replaced
with a new team.
• An investigation covering the four past accounting
years was initiated by Tesco, who appointed Deloitte
and Freshfields Bruckhaus Deringer for this task
(The New York Times, 14 October 2014).
• Tesco also notified the Financial Conduct Authority
(FCA), which indicated that Tesco may have sus-
pected foul play (BBC News, 22 September 2014).
On the 23rd of October, 2014 the Deloitte/Freshfields
investigation concluded that supplier payments had
been “pulled forward or deferred” in a manner that
was contrary to Tesco accounting policies. Further,
the investigation found that there had been “similar
practices in prior reporting periods” and that the sums
“pulled forward grew period by period”. The inves-
tigation found that the total overstatement was £263
million. Of that shortfall, £118 million related to the
first half of 2014, with an additional £145 million
relating to the past two years (Accountancyage.com,
23 October 2014). However, following further inves-
tigation these estimates have been revised. As per the
revised estimates from Tesco’s financial statements
for the year 2014-15, a total overstatement to profit
before tax of £53 million was for the year ending
22 February 2014 and a total overstatement of £155
million was for the years prior to that. (Tesco Annual
Report, 2015, p. 77, Independent Auditors’ Report)
• The Serious Fraud Office (“SFO”) has commenced
a criminal investigation and hence, the FCA has sus-
pended their investigation. The SFO investigation
could take several years. The SFO has the ability
to prosecute individuals as well as companies (The
Telegraph, 29 October 2014). Later on, the SFO
announced that they also would investigate key
suppliers of Tesco. (The Telegraph, 20 December
2014)
• Warren Buffet conceded that his investment in

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intended to sell his shares. Such a statement from an individual
of Buffet’s reputation might have had a huge impact on a
company’s reputation and value. Warren Buffet reported to his
shareholders a loss of
£287.6 million from the sale of his Tesco stock. (The
Guardian, 1 March 2015)
• The Chairman of Tesco, Sir Richard Broadbent, stepped down on
October 22, 2014 (Financial Times,
23 October 2014).
• On November 25, 2014 it was reported that a UK law firm,
Stewarts Law, was soliciting Tesco share- holders to participate
in a lawsuit against the retailer following the accounting scandal
that had wiped billions of pounds off the company’s stock market
value. (The Guardian, 25 November 2014)
• On December 22, 2014, the Financial Reporting Council (“FRC”)
announced that it would investi- gate the “preparation, approval
and audit” of Tesco’s financial statements by PwC during the
financial years ending in 2012, 2013 and 2014. The FRC also
indicated that its investigation would cover “con- duct in relation
to matters reported in the company’s interim results” for the first
half of the current finan- cial year. The FRC has the power to
issue unlimited fines to individuals or firms to suspend them
from professional accountancy bodies. As part of the
investigation, the FRC will consider whether it should take
regulatory action. (Financial Reporting Council, 22 December
2014)
• Both PwC and Tesco have announced that they will fully
cooperate with the FRC’s investigation. This investigation is
expected to take around one year.
• On October 31, 2014, the rating agency Moody’s warned Tesco
that its debt could assume “junk” rating if it did not outline
realistic plans to cut bor- rowing and improve trading results.
(Reuters, 31
October 2014)
• Over the past few months, various reports have indicated that
Tesco is likely to dispose off some of its non-core businesses
including its mobile phone division and its data analysis
operation. For example, Tesco has sold its video streaming ser-
vice Blinkbox to Talk Talk. Now it is in talks with the bankers
for selling its mobile business. (Retail Week, 11 May 2015 &
Tesco Annual Report, 2015, p. 77, Independent Auditors’ Report)

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• Tesco has announced that it will cut up to 10,000

jobs with 6,000 of these from its Head Office. (The
Telegraph, 14 February 2015)
• The final salary pension scheme of Tesco has also
been closed which means that new staff will receive
a significantly lower pension. (This is money, 8 May
2015)
• On February 4, 2015, the Grocery Code Adjudicator
(“Adjudicator”) announced that an investigation has
been launched into the conduct of Tesco under the
Groceries Supply Code of Practice. The Adjudicator
is specifically investigating Tesco’s conduct under
provisions of the Code relating to delays in payments
to suppliers and payments for shelf positioning.
(Tesco Annual Report, 2015, p. 33, Corporate
Governance Report)

7. Management and Governance Issues

In February 2011, after serving Tesco for 14 years, Sir
Terry Leahy stepped down as the chief executive of the
company and was replaced by Philip Clarke (Financial
Times, 8 June 2010). Less than a year after his appoint-
ment, Tesco shocked the market with its first profit
warning in almost 20 years. A change in top manage-
ment at a time when the company was facing pressures
on its revenue and profits was a red flag.

This also raises the issue of careful succession plan-

ning of change management in the businesses. Perhaps
if Sir Terry Leahy had continued to participate in
advisory capacity, whereby he could have shared his
insights and experience to the benefit of Tesco for
some more time while Philip Clarke was settling in
his new role, might have led to a different story for
Tesco.

In May 2014, when Tesco’s auditor (PwC) had warned

the company about the recognition of commercial
income, the company’s audit committee concluded it
was not a problem. Ken Hanna, the chairman of the
audit committee, dismissed the warning about the risk
of commercial revenues being manipulated (Business
Insider, 2 October 2014). If the board had taken PwC’s
queries as an early warning sign they could have mini-
mized the misstatement.

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The fact that the whistle-blower Tesco were measured by meeting targets and highly
considered it necessary to raise this issue incentivized to meet the same; this incentive structure
via the General Counsel is a concern in also acted as motivation to manipulate figures.
itself as this indicates a lack of trust
within the com- pany (Irish Times, 23 Beside the above facts, there have been various busi-
September 2014). ness decisions that Tesco’s management had been
taking in the years preceding the detection of this
It has been a common factor in most financial reporting fraud which demonstrate the man-
financial report- ing frauds - be it agement’s reluctance to adapt to the rapidly changing
Satyam, Enron or WorldCom - that the circumstances in the internal and external environment.
beginnings are small and then gradually Some such business decisions that proved to be grossly
take gigan- tic proportions similar to a miscalculated are:
balloon being inflated and then bursting
when it is unable to withstand the
pressure. This is evident from various
early warning signs that the Tesco’s top
management found it con- venient to
ignore; for example, an internal email of
Tesco’s CFO Laurie Mcllwee in 2012
warning the staff about the seriousness of
miss-declarations as well as repeated
mention by PwC to the audit committee
about the risk in recognition of
commercial income in the financial
statements. These examples also throw
into limelight another related issue that
needs to be consid- ered: whether it is the
perpetrator of fraud that is more
responsible or the one who is in a
position to prevent the fraud and
knowingly does not take any action until
the situation gets out of hand.

While Tesco’s business had grown

exponentially, it is apparent that internal
controls had not adequately grown. The
buyer had substantial power to negotiate
commercial deals with suppliers without
any oversight from the Finance
Department. The supplier arrange- ments
clearly had sufficient “flexibility” to be
open to some interpretation or
renegotiation. Furthermore, the
performance of senior staff members at

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• Entry into the USA was not properly thought out. Management change needs to be
Tesco has been criticized for miscalculating the carefully planned and managed,
market and failing to cater to American tastes. particularly when such a change involves
• Tesco continued to open large, out of town stores and replacing key executives. Before
failed to adjust for changes in UK shopping habits the accounting
of shopping more frequently at convenient locations
as well as increase in online shopping.
• Tesco diversified into many businesses, e.g. banking,
mobile network, movie streaming and restaurants
and consequently lost its focus on its core business,
being grocery retailers. This also resulted in it los-
ing its place as being the cheapest of the “Big 4”
retailers.
• On trying to respond to loss of market share, Tesco
started refurbishing its larger stores and adding
more amenities such as coffee shops and restaurants.
Arguably, this change did not result in an adequate
return on investment.
• Tesco reduced the level of rewards provided as a
part of its Club Card, which appeared to be a mis-
take, considering that its loyalty program was one of
its biggest success stories.
• From a cultural perspective, Tesco became increas-
ingly aggressive in trying to meet its earnings
forecasts at a time when its profits were falling.
This aggressiveness may have encouraged unethical
behaviour by staffs who were trying to meet targets.

8. Lessons Learned
8.1 Enterprise Risk Assessment
Good audit committees (and the auditors) need to focus
on key enterprise risks. Enterprise risks may not all
impact the financial statements of the company, but as
far as they do, these should be monitored by the audit
committee and taken into account by the external audi-
tors during audit planning. Furthermore, enterprise
risks are dynamic. For example, five years ago, Tesco
was not facing intense competition from “hard dis-
counters”. Therefore, such risks should be subject to
regular review.

8.2 Change Management

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scandal, significant change had occurred within the ranks of
Tesco’s top management. As part of any man- agement change, an
organization should do a “stock take” of where it stands and the
situation that is being passed on to the new management. This
approach makes it easier to ensure that new management does not
inherit any surprises.

8.3 Materiality
According to the last Tesco audit report for 2014-15, materiality
was £150m, with no individual error of more than £118 million.
Also, as per the audited finan- cial statements of Tesco for the
year 2014-15, the overstatement of profits has not been considered
mate- rial from the financial reporting perspective. (Tesco Annual
Report, 2015, p. 77, Independent Auditors’ Report)

Although the accounting error may not have been material from an
accounting perspective, the error was certainly material to investors
and other players in the financial markets, with Tesco losing
billions in value with a resulting downgrade of Tesco’s credit
rating. Additionally, the negative publicity will take time to
overcome. Materiality is normally a monetary value based upon a
key item such as turnover, profit or assets. Perhaps, it is time that
materiality also be defined in qualitative terms, taking into account
investor and public confidence.

8.4 Auditor Independence

PwC has audited Tesco since 1983. The threat of familiarity was
remarkably high after a relationship of 30-plus years. Arguably,
this might compromise the auditors’ independence in dealing with
Tesco. The Competition and Market Authority (“CMA”), formerly
the UK Competition Commission, has released its final order in
relation to mandatory audit tendering and the responsibilities of the
audit committee. The Order states that a ‘Competitive Tender
Process’ must be performed after the stipulated number of years
being audited. This must include bids from two or more auditors.
However, it may be noted that the existing auditor can also
participate in the tendering process and that there is no mandatory
removal of auditor. In contrast, the EU rules require the mandatory
rotation

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of auditors. Sarbanes-Oxley Act in the United States • There are changes needed in the entire area of financial
of America requires rotation of lead partner every five accounting and reporting such as fewer
years. Some of the large companies including Unilever,
HSBC, Shell, Diageo and Sainsurys had been replacing
their external auditors’ recently. This action of replac-
ing ones auditors has been encouraged by the Tesco
situation.

8.5 Corporate Governance

• Some reports also criticized the Tesco board for
failing to have non-executives who have relevant
experience with the supermarket sector. Furthermore,
there was a severe failure in corporate governance by
not having a Chief Financial Officer for five months
(BBC News, 22 September 2014). Many people
believe that the audit committee should have reacted
promptly and decisively to the issues related to com-
mercial income that PwC had raised. Perhaps, PwC
should have been more robust in dealing with the
audit committee regarding this issue.
• The effectiveness of Audit Committees needs to
be improved through appointing members with
accounting and auditing knowledge, industry
knowledge and experience in the specific business.
More regular and quality meetings need to be held
and members of the Audit Committee need to be
prepared to robustly challenge the auditors and man-
agement regarding internal controls (especially in
high risk areas). Furthermore, the external auditors
need to be robust when raising concerns with the
Audit Committee. Best practice also suggests that
Audit Committees need to be “educated” through
briefing sessions from key personnel within the
business.

8.6 Sound Accounting and Internal Controls

• In many companies, the value perceived by the
investors is in the business model. Clearly, the busi-
ness model, a company’s position in the market, and
profitability are often the main determinants of its
share price. However, the Tesco case indicates the
impact that not having sound accounting practices
and strong internal controls can have on the value
of a business.

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Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interestsand Sanjay Gupta
21
complexes, more intuitive and more to achieve results in line with market expectations.
understandable GAAP, and these Incentives need to be aligned on the basis of a “balanced
should be clearly interpreted and scorecard” with zero tolerance of aggressive accounting
consistently applied. measures to achieve financial results.
• Better and pragmatic auditing
standards are needed, especially in the 9. Remedial Measures being taken by
areas of revenue recognition,
TESCO
accounting estimates, allowances and
reserve and loss accruals. Furthermore, Major structural changes have been initiated in Tesco,
organizations need to develop clear which include: overhaul of management structure and
guidelines as to how these standards a new management team, reduction in capital spend-
are applied and external auditors ing, moving out from non-core businesses, greater
need to ensure that these are applied focus on ‘cost prices’ than on ‘commercial income’, a
as part of the annual audit and interim
reviews.
• Unduly complex transactions need to
be avoided as far as possible. Where
such transactions are inevita- ble, the
company needs to strictly define and
monitor the treatment of such
transactions.
• A strict code of conduct and “whistle-
blowing” process needs to be put in
place in any large orga- nization. The
fact that a concerned senior member
of the accounting department had to
raise their con- cerns to the Legal
Counsel rather than directly to the
Audit Committee, the CFO or the CEO
is concern- ing. A proper “whistle-
blowing” process may have meant that
the accounting error would have been
detected sooner.

8.7 Employees’
Incentives Policies
There are some causes that may
encourage accounting irregularities to
develop such as the value of performance-
based compensation, especially the value
of options, bonuses and other variable
compensation awards, for the CEO and
CFO and other senior management. These
cre- ate a great temptation to manage
earnings, set unrealistic revenue and
profit targets and manipulate accounting

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Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interestsand Sanjay Gupta
22

new Code of Business Conduct supported by a compa-

ny-wide training programme to help employees follow
key policies with stronger focus on ethics and compli-
ance. (Tesco Annual Report, 2015, p. 6 & 7, CEO’s
report)

Overall commercial relationships with the suppli-

ers and the incentive structure of Tesco’s commercial
teams are being reset. Tesco’s audited financial state-
ments for the year 2014-15 carry enhanced and more
transparent disclosures with regard to its accounting of
commercial income. Greater emphasis is being given
on proper accounting of commercial income. (Tesco
Annual Report, 2015)

After 32 years Tesco’s external audit has been put to

tender and PwC has mutually agreed that they would
not take part in the tender. Tesco has named Deloitte as
its new auditors.

Tesco is investing significant time and resource to

understand, evaluate and remediate the control weak-
nesses. Clear control improvement plans are in place.
(Tesco Annual Report, 2015, p. 39, Internal Control)

10. Conclusion
Preventing financial statement misstatement fraud
is like preventing sin. There always will be male-
factors, but financial fraud can be minimized and
its effects can be reduced if there are controls and
checks and balances in place to detect and prevent it.
It is self-evident that all financial frauds start small,
and then grow bigger and bigger, until they cause sig-
nificant harm to the investors and other stakeholders.
Experiences, based upon investigation and analysis of
many frauds, demonstrate that adequate internal con-
trols are a better preventative measure than effective
auditing.

To conclude, the natural cause of all the above types

of scandals is attributed to the gaps in internal controls
and auditors’ negligence. In the aftermath of the scam,
generally the CEO and the auditors bear the brunt of
the attack from The Guardians of society, the press, the
regulators as well as the public.

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 23 Gagan Kukreja
Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interestsand Sanjay Gupta
23
The ultimate price of these scandals is paid by the soci- ety at large,
particularly stockholders, who put their hard earned savings in these
institutions just on the basis of the trust on them. However,
whatever controls are put in place or whatever accounting and
reporting standards are set, if the people who are the part of sys-
tem themselves decide to bypass the control systems, it is next to
impossible to prevent the frauds like Tesco.

11. Limitations of the Study

All the information used is available in public domain and authors
have no access to inside information. Furthermore, the opinions
expressed are those of the authors and cannot be represented as the
views of any- one else. Where the views of others are expressed,
these are referenced appropriately.

Both authors have never worked as auditors or in other

capacities with Tesco and they have never held investments in
shares of Tesco. The authors have not interviewed any parties that
have been involved in the management of Tesco, the audit of Tesco
or the inves- tigation of the fraud.

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Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interestsand Sanjay Gupta
24

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25 Gagan Kukreja
Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interestsand Sanjay Gupta
25
epic/tsco/11187395/Tesco-shares-hit-11- boards in a num- ber of international referred journals.
year-low-as-as- retailer-hit-by-double- He presented many papers in international conference
whammy.html organized in US, Singapore, India, and Bahrain and
The Telegraph. (29 October 2014). so on. Native to India, Gagan attended the
Retrieved 20 July,
Chaudhary Charan Singh University, Meerut, India
2015, from
where he finished his bachelor, master and doctorate.
http://www.telegraph.co.uk/finance/
He was awarded Junior Research Fellowship from
ne wsb ysecto r/ep ic/tsco / 111 95 37 6 /
Tesco -to -b e- investigated-by-Serious-
University Grants Commission, India. He also holds
Fraud-Office.html various professional qualifications such CPA (US),
The Wall Street journal. (6 December ACCA (UK), CMA (US
2012). Retrieved 2 & India), and CIA (US). Dr. Kukreja’s research inter-
July, 2015, from est is in the area of financial accounting with a focus
http://www.wsj.com/articles/SB100014 on corporate disclosure, earnings management, foren-
24127887324640104578160 sic accounting and corporate governance. He can be
514192695162
contacted at gkukreja@ahlia.edu.bh or profgagan@
This is money. (8 May 2015).
Retrieved 21 July, gmail.com.
2015, from
http://www.thisismoney.co.uk/money/
markets/article -307 3878 /Tesco -
emb ro iled -ro w- hundreds-thousands-
employees-plans-make-savage- cuts-
pays-pensions.html

About the
Author(s)
Dr. Gagan Kukreja is Associate
Professor of Accounting in Ahlia
Universtiy as well as Director
(Professional Development), Bahrain
Overseas Centre of Institute of Cost
Accountants of India. He is also
Treasure of Bahrain Chapter of Certified
Fraud Examiners. He has over 18 years of
experience in uni- versity teaching. He is
actively giving training to CA, CPA,
CMA, CIA and ACCA students. Dr.
Kukreja is qualified doctorate supervisor
of Brunel UK. He is on International
Review Panel of Pearson Education. He
is organizing team member in various
local and inter- national conferences. He
chaired various technical sessions of
international conferences as well. He
also serves as a member of the editorial

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26 Gagan Kukreja
Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interestsand Sanjay Gupta
26

Sanjay Gupta is an experienced chartered accountant USA. He has over 25 years of rich and in-depth post
from the Institute of Chartered Accountants of India. qualification experience in diverse facets of financial
He is also a Certified Internal Auditor (CIA) from the operations, auditing and risk management. He is resi-
Institute of Internal Auditors, USA, and a Certified dent of the Kingdom of Bahrain since the year 2007 and
Information Systems Auditor (CISA) from ISACA, currently employed with the Central Bank of Bahrain
USA and Professional Risk Manager from PRMIA, (CBB) as Head of Reserve Risk Control.

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