11:14, June 06 363 0

2017-06-06 11:14:09
FRC drops investigation into PwC in Tesco accounting scandal

The Financial Reporting Council (FRC) has closed its investigation into PricewaterhouseCooper’s role as auditor for Tesco at the height of the 2014 accounting scandal when the supermarket overstated its profits by £326m.

The accounting watchdog said in a statement that its executive counsel had concluded that there was “not a realistic prospect that a tribunal would make an adverse finding against PwC and certain members in respect of the matters within the scope of the investigation”.

It added that it would continue to investigate “certain other members of the accountancy bodies”.

A source familiar with the matter said the FRC was still investigating individuals at bodies that license accountants to practice, such as the Association of Chartered Certified Accountants (ACCA). 

In June 2015, the FRC opened a disciplinary hearing against Mark Woodbridge, a former member of ACCA, whose conduct it found “fell significantly short of the standards reasonably to be expected of a member”.

The FRC launched an inquiry into PwC after Tesco admitted that it had overstated its profits. The scope of the investigation included PwC’s preparation, approval and audit of Tesco’s accounts from 2012-2014.

The supermarket chain saw pre-tax profits tumble by 92 per cent in the latter year, leading it to announce an annual loss of £6.4bn in 2015, one of the biggest in retail history.

In March of this year, Tesco agreed to pay a fine of £129m and the Serious Fraud Office’s full costs to avoid prosecution.

The grocer secured a deferred prosecution agreement (DPA) with the SFO, for which is called in Freshfields Bruckhaus Deringer to advise.

Alongside the SFO agreement, the Financial Conduct Authority (FCA) has also announced that Tesco has agreed it committed market abuse and will pay £85m in compensation to investors who bought shares and bonds after August 2014.

A spokesperson for PwC said: “We cooperated fully ​during the FRC​’s​ thorough ​investigation and are pleased that​ ​the FRC has closed it without any further action.”