TESCO SHAREHOLDERS didn’t wake up on Monday and expect to see 12% of their equity wiped off – but that’s what happened yesterday.
It is early days – in fact a day to be precise. The story behind the £250m writedown at the UK’s biggest grocer will take many more days to tell, with its aftermath and impact to be felt for weeks and months.
The blame game is currently focused through the suspension of the UK FD and MD and two other directors, but it’s likely to diffuse. Has PwC questions to answer, or was Tesco’s accounting policy recently changed and not on the auditor’s watch?
Will mud stick on the recently departed group FD Laurie McIlwee and CEO Philip Clarke? And with McIlwee apparently out of the door in the past week or so, who’s running finance? That last question has at least been answered as I write, with Alan Stewart parachuted in from Marks & Spencer a couple of months early.
The non-executives, which can count finance chiefs of the calibre of Ken Hanna and Mark Armour on board, will be mortified. But blame-free?
Is it good that the whistleblower came from the finance function, or should checks and balances in the function have picked up the issue earlier? Has internal audit succeeded, or missed a trick?
What is clear is that the pressure to place Tesco back on its pedestal as the star of UK business has seen a collapse of governance – be it through either a deliberate act or just incompetence.
With such a big company backed by institutional investors, I think we can expect some pious words from our MPs any time now. Tesco might have soul-searching to do, and provide answers and solutions to stakeholders, suppliers, the public and regulators but we could do without government hand-wringing and rhetoric, then another depressing consultation and even more red tape.
As ever, even disastrous situations see some winners. Unsurprisingly it’s the professional advisers – with Deloitte and Freshfields leading the investigation into the accounting errors.
Many await their findings with trepidation.
Kevin Reed is editor of Accountancy Age and Financial Director
An improved internal audit code is "vital' to developing the City's risk management, former shadow chancellor Ed Balls has said
Accountancy Age Jobs is delighted to announce the launch of a brand new look website for finance and accountancy professionals
The UK gender pay gap will not close until 2069 unless action is taken to tackle it now, according to new research by Deloitte
The latest opinions from Accountancy Age on Making Tax Digital, and outline plans to evolve the UK's corporate governance regime