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UK Watchdog’s Tesco Accounting Fraud Case Collapses

The case against two former Tesco directors initiated by U.K. regulators earlier this year has collapsed after a judge dismissed the case due to lack of evidence, reports in the BBC said Thursday (Dec. 6).

The U.K. Serious Fraud Office (SFO) unsuccessfully attempted to have Judge Sir John Royce’s decision overturned. Judge Royce had concluded “in certain crucial area the prosecution case was so weak it should not be left for a jury’s consideration.”

Chris Bush, former U.K. managing director at Tesco, and John Scouler, the grocery giant’s former U.K. food commercial director, were accused by the SFO of manipulating financial reports to overstate profits. Both have denied the charges, which included allegations that they were aware of internal efforts to make it appear as if Tesco had been more financially healthy than it actually was.

Tesco acknowledged in the autumn of 2014 that it overstated profits, the BBC said. At the time, the company said that it was, in part, a result of prematurely recognizing payments from suppliers.

A previous legal effort from the SFO had been abandoned earlier this year just before a jury was slated to deliberate its verdict. The collapse of the watchdog’s case has garnered criticism both against the regulator and against the judge’s decision to toss the case.

“This outcome now raises more questions than answers,” reflected BBC business correspondent Emma Simpson. “And it’s the Serious Fraud Office that is under the spotlight for its handling of this case.”

The case’s collapse also comes amid rising scrutiny of a perceived lack of transparency into public U.K. corporate finances following a series of scandals.

Separate reports on Thursday in AccountingToday said the nation’s top auditors, including KPMG and PwC, have been urged to improve their corporate accounting processes, with the U.K.’s Financial Reporting Council urging auditors to implement enhanced procedures as they pertain to compiling “Other Information” when building firms’ annual reports.

Earlier this year the FRC became the target of scrutiny as the government launched a “root and branch” review of its effectiveness following series of accounting scandals.


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