Tesco suspends directors as investigation into profits overstatement is launched

UK's largest retailer, Tesco has decided to defer its half-year financial report

and suspended four executives after discovering that its first half profit guidance was overstated by 250 million pounds.

In a statement published on Monday, Tesco noted that overstatement was “principally due to the accelerated recognition of commercial income and delayed accrual of costs.” The company has taken on independent accountants and lawyers and begun an internal investigation.

The company's board has also asked accountancy firm Deloitte and its external legal advisers Freshfields to conduct “an independent and comprehensive review” of the overstatement and the impact the issues may have on its full-year results.

“We have uncovered a serious issue and have responded accordingly,” commented Dave Lewis, chief executive officer at Tesco. “The Chairman and I have acted quickly to establish a comprehensive independent investigation. 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.”

Lewis also revealed to BBC news that “a number of people” had been suspended from work “to facilitate the fullest and deepest investigation possible,” but added that this action was in no way “disciplinary or an admission of guilt.”

Chris Bush, UK managing director, Carl Rogberg, UK finance director, John Scouler, commercial director and Matt Simister, head of food sourcing are among the directors thought to have been suspended.

Company shares dropped 8 percent during early trading, following the announcement, which saw nearly a quarter of Tesco's expected profit for the period overstated. The company will provide further updates on the matter at its interim results, which will be announced on the 23 October, 2014.