Chris Bush, current UK managing director, is understood to be one of four executives suspended following the discovery of the error, which was uncovered as the supermarket prepared for its interim results.
In a statement, Tesco said the error was largely due to “the accelerated recognition of commercial income and delayed accrual of costs” – or, in other words, billing commercial income in the wrong time period.
The Tesco board has appointed Deloitte to undertake an independent investigation into the issue, which looks to have taken place in the first half of this year. The company’s current auditors, employed at the time the error took place, are PwC.
Tesco says it will provide a further update at its next interim results, which have now been postponed until 23 October. The results were due to be reported on 1 October.
The error provides a further headache for group CEO Dave Lewis, who joined just three weeks ago with the task of turning around the embattled retailer.
Shares in Tesco had already reached an 11-year low in August when the company cut its full-year profit forecast from £2.8bn to £2.4bn. Tesco’s share price was down 8.6 per cent to 209.90p at the time of writing.
Lewis said in a statement: “We have uncovered a serious issue and have responded accordingly. The chairman and I have acted quickly to establish a comprehensive independent investigation. The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear.”
Chairman Richard Broadbent said on a call with media this morning that he will not resign as he looks to lead the company through its latest crisis.
Neil Saunders, managing director of retail consultancy Conlumino, says: “Today’s announcement will further undermine market confidence in a company that has already lost a lot of investor goodwill. Mistakes do happen, but this gives the impression of a company that is not in full control of its internal procedures. It is just not what you expect from a company as large as Tesco.”
The announcement also indicates that Tesco’s financial performance was much weaker than anticipated, which Saunders says will alarm investors as it has now emerged the company has much further to travel to recovery than first thought.
“It is now more imperative than ever that Tesco outline a very clear and compelling strategy as to how it intends to put is UK business back on track,” Saunders adds.
Terrell, a former executive director at House of Fraser, joined Tesco in 2013 to lead its multichannel efforts. He has also held roles as managing director of John Lewis direct, chief operating officer of Figleaves.com and vice president and managing director at Amazon.co.uk.