Analysis of Accounting Misstatement at Tesco and Accountant's Role

This report provides an in-depth analysis of the accounting misstatement at Tesco Plc during the 2014-2015 financial year. It examines the overstatement of financial statements by £263 million, highlighting the company's corporate social responsibility (CSR) initiatives, and the impact of the scandal on the company's financial performance. The report discusses the role of accountants in the misstatement, the weaknesses in financial reporting, and the implications of aggressive accounting practices. It explores the factors contributing to the fraud, including sales targets and the overstatement of financial figures. The report also references the CSR activities undertaken by Tesco, such as food waste reduction and community contributions. Additionally, it references the theories of corporate social responsibility proposed by Milton Friedman and Henry Mintzberg to provide context to the misstatement and its impact on stakeholders. The report concludes by emphasizing the need for accountability and the importance of ethical accounting practices.

Running head: ACCOUNTING MISSTATEMENT AT TESCO AND THE ROLE OF
ACCOUNTANTS
Accounting Misstatement at Tesco and the role of Accountants
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING MISSTATEMENT AT TESCO AND THE ROLE OF ACCOUNTANTS
Introduction
In recent decades, corporate social responsibility has become the most concerned area of
the global companies. In this study, Tesco Plc has been taken into consideration which is a
multinational company based in UK and mainly deals with retain sector. The challenge of
corporate social responsibility is required to be met by the company in their normal course of
business. The accounting scandal in the financial year 2014 – 2015 of Tesco Plc is also required
to be considered. Moreover, the role of the accounts on this particular case is also required to be
addressed.
Discussion
Corporate Social Responsibility (CSR) is the self-regulation of the business which
requires the main aim for overall contribution of goals that are related to the society. Engaging
the support of volunteering mainly highlights the ethically oriented practices that are required to
be included with the overall operation of the company (Karim et al. 2015). The supermarket
chain of UK has pointed the major role of Corporate Social Responsibility that are required to be
performed as per the requirement of the society which would help the local people. In recent
years, it has been seen that the large number of companies are recognised to be benefitted with
the basic practices and incorporating the social responsibility policies (Kukreja and Gupta 2016).
Several empirical studies have been identified with the positive impact on the values of the
business along with the measurement of the company’s policies. The organisation would also
have been encouraged for adopting the expanding efforts which mainly results in the pressure
from the suppliers and also from the consumers (Souza-Monteiro and Hooker 2017). The
benefits of the Corporate Social Responsibility has been met by the company that is Tesco Plc by
measuring the both quantitative as well as qualitative analysis of the activities. The loyalty of the

2ACCOUNTING MISSTATEMENT AT TESCO AND THE ROLE OF ACCOUNTANTS
customers that works more comfortably mainly shares the greater ability which would beneficial
for the company in their normal course of business.
In the financial year 2014 – 2015, Tesco Plc had to face a financial scandal in which the
company has overstated their financial statement by £ 263 million after the process of revenue
recognition. The regulators had spotted the half yearly results that highlights the Financial
Conduct Authority along with deciding the suitable factors of punishment (Edinger-Schons et al.
2019). The normal prediction by the company is around £ 1.1 billion on that particular financial
year but it has been figured out to be £ 263 million on which the original amount has been
around £ 250 million. Tesco Plc had almost touched the revenue figures but it has overstated the
financial statement which turns out to be the initiation of the accounting misstatement (Kukreja
and Gupta 2016). The overstatement of the figures in the financial statement has pointed their
negligence along with the carelessness during the time of recoding the financial transactions.
Undertaking an independent and comprehensive review of the statement has shed light on the
accelerated recognition of the commercial income. The delayed in the form of accrued cost has
also highlights the overall impact of the accounting misstatement (Accaglobal.com 2019). As per
the investigation, it has been found that the total amount of profit have been overstated by £ 118
million within the first half of the year and that have to be increased with the end of that financial
year.
The fraud that has been detected in Tesco Plc includes the sales that are of different kinds
which are required to be allowed for the current moving goods to the consumers. The retail
sectors provides separate base of products or goods which are required to be assessed on the
form of vendors that highlights the allowances of the discounts (Tse et al. 2018). The volume
discount in the form of cash points out the protection of price that are required to be associated

3ACCOUNTING MISSTATEMENT AT TESCO AND THE ROLE OF ACCOUNTANTS
with the cooperative advertisement along with the promotional allowances. The slotting fees are
also important which includes the effective management on the company for pointing out the
favourable location for performing corporate social responsibility (Madichie and Yamoah 2017).
The listing fees are also included with the charges that highlights the favourable location along
with highlighting the place of the new products. The deals are on the common product of the
super market and for that reason the estimated account are disclosed for the large super markets
(Kukreja and Gupta 2016). The former Chief Financial Officer of Tesco Plc have mentioned that
the weakness of the company might face certain type of loss which might affect the business in
their normal course of operation (Kizil and Kaşbaşı 2018). The payments that are made during
the disputed reporting period highlights the original revenue which is required for analysing the
fraudulent activities within the financial statement.
The CSR activity that are implemented by Tesco Plc are to stop wasting foods from
waste which would enhance the overall level of human consumption. They were the first retailer
who have taken these type of measures for assuring that the foods are not wasted. The foods that
are surplus in nature are required to be stored and that would be beneficial for future period of
time (Coe, Lee and Wood 2017). The process are required to make easier which would allow to
achieve the sustainable goal which makes it easier to stay healthy. The theory of corporate social
responsibility by Milton Friedman mainly points out that there is only one corporate social
responsibility which would be beneficial for the company and that particular activity is required
to be achieved (Umich.edu 1970). The activities are designed in such a manner which would
allow the company to increase their total amount of profit and engages with open and free
competition (Barnard and O'Connor 2017). On the other hand, the theory of corporate social
responsibility by Henry Mintzberg mainly sheds light on the implementation of the strategies

4ACCOUNTING MISSTATEMENT AT TESCO AND THE ROLE OF ACCOUNTANTS
that mainly help in enhancing the corporate competitiveness (Pdfslide.net 2020). The strategic
thinking is to be implemented with executing the strategy which is required to be enhanced with
certain perspective of corporate social responsibility.
The contribution towards the community is also one of the important aspect that the
company has considered. The company that is Tesco Plc have claimed that the staffs of the
organisation has achieved a record where the company have funded around 4.4 billion pound to
the British Red Cross. The provision for providing hygienic food along with providing assurance
from contaminating water (Schaefer, Scheitrum and Nes 2018). Keeping the health in a good
condition is also another aspect that points out the supportive nature to adopted for improving the
health and safety program. The improvement of the health practices is required to be claimed for
adopting the policies and procedures (Ibrahim and Howarth 2017). The accounting misstatement
at Tesco has affected their financial statement and other activities of corporate social
responsibilities for which the company has been unable to perform those activities.
The addressing of the issues within the organisation have been highlighted with the
effective policies that points out the importance of corporate social responsibilities for the
company. The training of employees for performing the activities of corporate social
responsibility help in better handling of health and safety measures with in the business activities
(Tse, Wang and Zhang 2019). The market chain of Tesco Plc provides the general assistance
which implements certain strategies that highlights the effective communication among the
employees for better management. Accounting misstatement in Tesco Plc have wiped off a huge
of fund from the company and that have to be placed in a dominant position (Bozic, Siebert and
Martin 2019). The aggressive accounting is also responsible for the fraud within the company in
which the statement have been overstated (Falkheimer and Heide 2015). It has also been

5ACCOUNTING MISSTATEMENT AT TESCO AND THE ROLE OF ACCOUNTANTS
understood that some of the employees are liable for this case as they have to meet the sales
target which have been provided by the company
Conclusion
The above study can be concluded by highlighting the accounting misstatement in the
financial statement for the accountants are to be blamed. The investors of the company are in
continuous demand of increasing the overall performance of the company for which the damage
might be prolonged for the company. The supermarket chain of UK has pointed the major role of
Corporate Social Responsibility that are required to be performed as per the requirement of the
society which would help the local people. The benefits of the Corporate Social Responsibility
has been met by the company that is Tesco Plc by measuring the both quantitative as well as
qualitative analysis of the activities. The normal prediction by the company is around £ 1.1
billion on that particular financial year but it has been figured out to be £ 263 million on which
the original amount has been around £ 250 million. The accounting misstatement at Tesco has
affected their financial statement and other activities of corporate social responsibilities for
which the company has been unable to perform those activities. Moreover, the role of the
accountants are to be questioned for this scandal.

6ACCOUNTING MISSTATEMENT AT TESCO AND THE ROLE OF ACCOUNTANTS
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