Global Research Group
Accounting Fraud at Tesco Stores (A)
by Jonas Heese, Suraj Srinivasan, Julia Kelley,
Accounting Fraud at Tesco Stores (A) ^ 120032
Jonas Heese
Suraj Srinivasan
Julia Kelley
Breadcrumb Series:
Source: Harvard Business School
This case describes the accounting fraud at Tesco Stores Limited (TSL), which was discovered by a senior accountant in TSL's finance department. The accountant was concerned about TSL's handling of commercial income, which, according to the accountant, overstated Tesco's profit by an estimated £246 million. Beyond the accounting issue, the case describes Tesco's organizational and cultural shortcoming causing this problem, how Tesco's new CEO Dave Lewis responded to the allegations, and how the court held the Tesco accountable for its fraudulent accounting. In September 2014, Amit Soni, a senior accountant in Tesco Stores Limited's (TSL) finance department filed a report with Tesco's legal team. Soni was concerned about TSL's handling of commercial income. According to the accountant's allegations, TSL employees had been inflating commercial income to meet the division's financial targets, causing Tesco's projected trading profit for the six months ended August 23, 2014 to be overstated by an estimated £246 million. Tesco's legal team had quickly referred the issue to CEO Dave Lewis, who had started in the role just a few weeks earlier, on September 1. Lewis had to decide how to respond to these allegations. Did the allegations have merit and what are the causes for the accounting violations? Should managers be removed if Tesco determined that the allegations had merit? What were the legal consequences for Tesco and how should Tesco's organizational structure and culture evolve?
Product #: 120032
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