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Applied Business Research and Analysis

   

Added on  2020-05-08

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Running head: APPLIED BUSINESS RESEARCH AND ANALYSISImpact of accounting scandals on organizational performance: In the context of Tesco, Uk

APPLIED BUSINESS RESEARCH AND ANALYSIS 2Abstract This research discusses that what went wrong in the Tesco that have led to conduct the fraud of accounting misstatement at high extent i.e. £263 million. It also explores the study why the fraudremained concealed for many years. It also explained the terrible consequences for Tesco and its main stakeholders. Moreover, it emphasizes on the strategies to overcome the accounting scandals in future with considering the sound accounting practices, internal controls and employee’s incentives policies, and enterprise risk assessment. It also evaluates the fraud accounting triangle model to assess the factor affective fraudulent activities. Finally, it is analyzed that these accounting scandals had affected to stakeholders who had invested their high amount of earned saving in the Tesco and analyzed that these scandals have taken place due to gaps in internal controls and auditors. This report is beneficial for CEO and employees of retail companies such as Tesco, and business owner to assess the impact of accounting scandals on organizational performance. For this, data is collected from different available sources like newspaper, websites, annual report, and other articles.

APPLIED BUSINESS RESEARCH AND ANALYSIS 3Table of ContentsAbstract............................................................................................................................................2Introduction......................................................................................................................................4Research background...................................................................................................................4Rationale of this study.................................................................................................................4Purpose and objectives of the topic.............................................................................................4Research question........................................................................................................................5Literature Review............................................................................................................................5To explore the meaning and concept of accounting scandals......................................................5To address the method of detecting fraud in Tesco.....................................................................6To identify the remedial measures being taken by TESCO........................................................6Recommend the strategy to overcome the accounting scandals in future: In context of Tesco, UK................................................................................................................................................7The Fraud Triangle Model...........................................................................................................8Research methodology...................................................................................................................10Introduction................................................................................................................................10Research philosophy..................................................................................................................10Research Approach....................................................................................................................11Research design.........................................................................................................................11Research Purpose.......................................................................................................................12Data Collection Method.............................................................................................................12Sampling....................................................................................................................................12Data analysis..............................................................................................................................13Ethical consideration.................................................................................................................13Presentation of results and discussion...........................................................................................13Conclusion.....................................................................................................................................19References......................................................................................................................................20Figure 1: Sales performance of Tesco..........................................................................................14Figure 2: Stock price of Tesco.......................................................................................................15Figure 3: Share price of three retailers..........................................................................................16Figure 4: Stock performance of Tesco...........................................................................................16Figure 5: Profit performance of Tesco...........................................................................................17Figure 6: Tesco’s uptick in its performance in UK.......................................................................18Figure 7: Changes in share price after accounting scandals..........................................................18

APPLIED BUSINESS RESEARCH AND ANALYSIS 4Introduction Research backgroundTesco is the supermarket giant in the UK which has conducted accounting scandals. In this way, it has admitted six-month profit at the end of 23rd August 2014 by overstating estimate amount of£250 million. It is analyzed that shares of Tesco are declined over 11 years and destroy approximately £2 billion from Tesco’s worth. Further, four top managers were suspended in which managing director of UK was also involved. This investigation has been ongoing on since last four years by Tesco. Another fraud was a misstatement of financial records that was conducted by most recognized company i.e. Tesco hence it has a negative impact on the investors. This issue has conducted due to different reason such as misstatement of financial reporting practices, corporate governance, auditing standards, and internal controls (Duell, 2017). Rationale of this studyThis research is beneficial for readers to gain their understanding regarding the impact of accounting scandals on organizational performance. It is also significant for Tesco companies to understand the method of detecting fraud and also effective to comprehend the remedial measures being taken by TESCO. This research is also beneficial for retailers to gain depth understanding regarding different strategy to overcome the accounting scandals in future (Business Insider, 2017). Purpose and objectives of the topicThe main purpose of this research is to analyze the impact of accounting scandals on organizational performance: In the context of Tesco, UK. Following objectives are used to attain the main aim of this research:

APPLIED BUSINESS RESEARCH AND ANALYSIS 5To explore the meaning and concept of accounting scandalsTo address the method of detecting fraud: in context of Tesco, UKTo identify the remedial Measures being taken by TESCORecommend the strategy to overcome the accounting scandals in future: In context of Tesco, UKResearch questionWhat are the meaning and concept of accounting scandals?Which methods can detect the fraud: in context of Tesco, UK?What are remedial measures being taken by TESCO?What are the strategies to overcome the accounting scandals in future: In the context of Tesco, UK?Literature Review To explore the meaning and concept of accounting scandalsAccording to BBC (2017), accounting scandals are arising due to intentional manipulation in financial records. It also created due to disclosure of financial misdeeds through trusted managers of government and corporation. These misrepresentations entail the complicated technique to misdirect and misuse funds, understating expenses, overstating revenues and worth of company asset and underreporting the presence of liabilities. These scandals can be conductedby the employees and company for misleading the investors and shareholders. This kind of creative accounting can generate a high amount of fraud hence assessment should be conducted by government oversight society like security and exchange commission in the UK. Employees who conducted accounting fraud at the desire of their workforces may come under the prosecution of the personal criminal.

APPLIED BUSINESS RESEARCH AND ANALYSIS 6To address the method of detecting fraud in TescoIn opposed to this, Hope (2016) stated that a whistle-blower through the legal department is detected by new CEO, Dave Lewis. In such case, the company has estimated its first-half profit and announced on August 29. It has also overstated by £246 million. The whistleblower was a member of the finance department. It is concerned that his department was not getting the full credential associated with commercial revenue. The chairman and CEO have appointed by a general counsel of Tesco on the situation. It is analyzed that Tesco had announced the overstatement of revenues on September 22, 2014. According to the audited financial statement of Tesco for the year of 2014-15, the sum of overstatement regarding profit before tax for the year 2015 was £53 million and total overstatement of the previous years was £155 million. To identify the remedial measures being taken by TESCOIndependent (2017) opined that major structural transformations have been started in Tesco. These are new management team, an overhaul of management structure, moving out from non-core business, reduction in capital spending, a new code of business conduct, and higher emphasize on cost price as compared to commercial income. In this way, corporate training initiative plan can help employees to conduct ethics and compliance at the workplace. Further, commercial liaison with the suppliers and incentive framework is reset by a commercial team of Tesco. Along with this, audited financial statement of Tesco for the year 2014-15 is enhanced and more visible disclosure of its bookkeeping of viable revenue. The company is also focused on adequate accounting of commercial revenues. In support to this, The Guardian (2017) stated that external audit of Tesco has been passed to tender after 32 years along with PwC has equally agreed that they will not engage in the tender. Tesco also announces new auditors such as Deloitte to make proper auditing. Tesco is also

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