Tesco Shares Tumble as Investigation Begins into £250m Accounting Black Hole
Tesco has suspended four senior executives and launched an inquiry after discovering a fault in its accounts.
The error has forced the supermarket chain to cut its profit forecasts for the third time this year.
The UK's largest grocer reduced its first-half outlook by £250 million and conceded its previous profit warning on 29 August had overstated its expected revenues over this period by 23%.
Discovered during preparation for the company's forthcoming interim results, the fault will now be subject to an inquiry headed by Deloitte.
It is thought the discrepancy arose from the early booking of revenue and delayed recognition of costs.
As a result, the results have now been delayed and will be published on 23 October, rather than the first of the month.
New Chief Executive Dave Lewis said he had been informed of the issue on Friday and has since placed four executives on leave while investigations continue.
Tesco has refused to comment, but both the BBC and Sky News have reported that Chris Bush, Managing Director of the company's UK business, is one of those who have been suspended.
'We have uncovered a serious issue and have responded accordingly. The chairman and I have acted quickly to establish a comprehensive independent investigation,' Mr Lewis stated.
'The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear.'
Shares in the company tumbled by 12% as investors reacted to the latest revelations, speculating as to the extent to which the error will impact the grocer's full-year results.
Under previous Chief Executive Phil Clarke, Tesco was forced to issue three profit warnings in two-and-a-half years as it lost out on market share to discount rivals such as Aldi and Lidl, as well as the more upmarket Waitrose and Marks & Spencer
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By Jonathan Sudaria, 22 September 2014