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June 8, 2020, 11:47 p.m. EDT

U.K. regulator finds no misconduct in Tesco probe

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By Nina Trentmann

The U.K. Financial Reporting Council closed its final investigation into Tesco PLC's earnings statements, concluding that it couldn't find evidence of misconduct among accountants.

The regulator in 2014 began an investigation into the conduct of some of the British grocer's employees who were allegedly involved with the overstatement of company profit forecasts in 2014, and approval and audits of financial statements for the fiscal years 2012, 2013 and 2014, and interim results released Oct. 23, 2014.

Tesco in September 2014 said it had suspended four senior executives and called in outside auditors and legal counsel to investigate a GBP263 million ($334.5 million) overstatement of its first-half profit forecast. The issue involved the early booking of income and delayed booking of costs, Tesco said at the time.

Tesco's U.K. retail arm, Tesco Stores Ltd., in 2017 entered into a deferred prosecution agreement with the U.K.'s Serious Fraud Office that included a GBP129 million fine and the implementation of a compliance program. Trials brought by the SFO against three former Tesco executives c oncluded without convictions. Tesco's agreement concluded April 10, according to the SFO.

The FRC said it decided to end its investigation -- which had been temporarily paused because of the SFO's pending trials -- into the unnamed Tesco accountants following the closure of the fraud agency's proceedings and after its investigators examined material from the SFO.

"We looked at individual members of the finance function," a spokesman for the FRC said. "It wasn't found that they committed misconduct," the spokesman said. The FRC said it isn't disclosing names because there was no evidence of wrongdoing, the spokesman said.

The FRC also closed an investigation into PricewaterhouseCoopers, Tesco's auditor at the time, in 2017 following the closure of an investigation into the company's former chief financial officer in 2016. The FRC concluded there was no realistic prospect of adverse findings against PwC or former CFO Laurie McIlwee.

Tesco said it has transformed its business practices, and the turnaround was complete. The company last week said its current CFO, Alan Stewart, who was brought in after the accounting scandal in 2014, plans to retire in April 2021.

Matteo Castia contributed to this article.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

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