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UK watchdog to investigate Tesco accounts and auditor PwC

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December 22
8:18 AM 2014

Britain's accounting watchdog has launched an inquiry into the preparation, approval and audit of Tesco's accounts over the last four years, including the role of external auditor PwC [PWC.UL].

Supermarket chain Tesco said in September that it had overstated first-half profits by 250 million pounds ($391 million) due to incorrectly booking payments from suppliers - a figure later raised to 263 million pounds, compounding earlier profit warnings.

The scandal led to the suspension, then exit, of several senior executives and sparked a series of investigations, including by Britain's Serious Fraud Office and possible investor lawsuits both in Britain and the United States. 

Watchdog the Financial Reporting Council (FRC) said on Monday its investigation related to Tesco's financial years ended Feb. 25, 2012, Feb. 23, 2013 and Feb. 22 2014 and the first half to Aug. 23 2014.

"The FRC has launched an investigation under the Accountancy Scheme into members and a member firm in relation to the preparation, approval and audit of the financial statements of Tesco," the FRC said on Monday.

Tesco said it had noted the FRC's statement. "We will provide support to the FRC's investigation," said a spokesman.

PwC has been Tesco's auditor since 1983.

"We take our responsibilities very seriously and remain committed to delivering work to the highest professional standards. We will co-operate fully with the FRC in its inquiries," PwC said in a statement.

The FRC has powers to sanction accounting firms and their staff for failing to apply book-keeping rules properly.

Shares in Tesco, down 45 percent so far this year, were down 0.5 percent at 184.4 pence at 1213 GMT.

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