Tesco profit probe: What you need to know

As four executives are suspended, The Independent looks at four key issues as the latest Tesco disaster unfolds.

(Rex Features)

Tesco has launched an investigation into how profit forecasts were inflated by £250 million, including questioning former boss Phil Clarke. These is what you need to know as the probe unfolds:

What actually happened?

According to Tesco; when a promotion is booked with a supplier, the supplier pays the supermarket a wad of cash for to make the end of an aisle look pretty and to pay for promotional material.

Both sides agree a date for the promotion to start – in say six months – but Tesco appear to have been writing up the cash into its accounts before the actual event. It means next year’s hypothetical promotion is appearing on this year’s accounts.

How long has this been going on?

The investigation will look at the last six months, but chief executive Dave Lewis says it could stretch back further if needed.

How much will be wiped off from profits?
So far, Tesco estimates this particular practice will knock £250m off profits, but it could grow much bigger if the digging reveals anything more.

Who is in trouble?

So far four executives have been suspended during the investigation by Deloitte and lawyers Freshfields, although there’s no suggestion of wrongdoing.

PwC will face scrutiny – they have audited Tesco since 1983 – and were recently asked to look precisely at the commercial division of the business, but found no wrongdoing. If Deloitte’s report find’s faults in its rival’s audit there could be trouble.

Sir Richard Broadbent, the chairman also earns the distinguished “under-fire” moniker for his handling of this crisis. Not naming the four execs was a mistake and presiding over a rudderless board (which has not known retailers on it) is very telling.