by Jim Kaitz, CEO, Association for Financial Professionals (AFP)
In this article, Jim Kaitz, CEO of the Association for Financial Professionals (AFP), comments on the Tesco inquiry and outlines the importance of a strong corporate culture, reliable forecasting practices and the integration of corporations’ risk management practices with their financial planning and analysis departments.
Tesco’s profit overstatement
After a few successive profit warnings, a plummeting share price, difficulties retaining customers in the current UK supermarket price war and the subsequent departure of its CEO, Tesco recently announced that it had overstated its profits by 23%, or £250m. Following the announcement of this ‘accountancy scandal’, Tesco launched an investigation and suspended five executives, including most recently, its Group Commercial Director.
The £250m shortfall was brought to the attention of the company by a whistle-blower. Allegedly, the retailer was prematurely booking income from supplier deals whilst pushing back costs. According to some sources, these actions were taken to help the retailer to compete with the likes of Aldi and Lidl.