Tesco's overstated profit the result of "inappropriate behavior"

The ongoing investigation into Tesco's 250 million pound overstated profit has

discovered evidence which suggests a group of people within the UK's largest retailer worked together to purposely misled its auditors and accountants to boost its financial results.

According to two reports from the Sunday Telegraph and Sunday Times, accountancy firms Deloitte and Freshfields, which were asked to conduct an independent review of the issue, evidence has been found which shows that Tesco's profit overstatement involved a “small group” of employees, including its “booking of supplier contributions that were conditional on hitting sales targets that it was not going to reach.”

The “small group” of staff then attempted to struck deals with suppliers once they realized that these sales targets would not be meant, by offering benefits during the next financial period to help make sure the deals would not be unearthed.

A senior source who is said to be close to the investigation told the Sunday Telegraph that “the practice had been going on for more than a year,” on a smaller scale, but had increased over the past six months” as Tesco's sales declined. The sourced added that the current situation at Tesco was “very serious” and was not just an accounting problem but the result of “inappropriate behavior”.

Other sources within Tesco have confirmed that ongoing concern among its finance team and auditors in relation to its commercial income for a longer period time which has been “ignored for months”. Tesco's auditors, PwC warned earlier this year that there was a “risk of manipulation” based on their assessment of the retailer's commercial income earlier this year, but based on the information available, their accounts were declared to be in order.

Tesco is set to share the preliminary findings of its internal investigation as well as its interim results later this week.