Reference no: EM131934015 , Length: word count:2500
Assignment Question -
In September 2014, Tesco's - the UK-based supermarket chain and one of the world's largest retailers - board of directors announced that it had identified an overstatement of its profit by £250 million for the half year ending August, 2014. This was attributed to an acceleration of the recognition of its UK commercial income together with a delay in the accrual of costs. This news prompted a plunge in Tesco's share price. Additionally, almost £2.2 billion was wiped from Tesco's value on the stock market. It had been a remarkable year for Tesco and the incident raised many questions about accountability, representation and control in the retail chain.
Use the Tesco's annual report and financial statements 2015 for the 53 weeks ending 28th of February, 2015.
The annual report includes the independent auditor's statement and the chain's approaches following the overstatement incident. The board of directors' statement on the incident is also detailed on page 33 of the Tesco annual report. Use the data in Tesco's annual report together with the lectures and seminar readings to develop answers to the questions below. A list of other 'recommended readings' for this module will also be available to you on Blackboard.
You are also encouraged to use any other relevant academic articles to demonstrate your answers to the questions.
In your opening discussion, briefly comment on the major changes (whether in monetary values or ratios) which you think have influenced the chain's financial position, its financial performance, and any other dimensions of performance. In the narrative parts please develop answers to the following questions:
1) How might accounting representations have enabled this overstatement incident to take place? In your discussion, provide a critique of the claim that accounting mirrors, and can objectively represent, economic reality.
2) a) Describe the accountability relationships in place at Tesco at the time when this incident occurred and afterwards.
b) From the analysis of Tesco's annual report can you identify who is accountable for the overstatement? Why or why not? In your discussion, provide a critique of accounting as a neutral, technical system for accountability.
3) Thinking about solutions;
a) What forms of controls and/or risk management approaches do you think would be useful to avoid the reoccurrence of future similar incidents?
b) What considerations should be taken in implementing your suggested control and/or risk management approach?
Word limit: 2,500 words.
Attachment:- Assignment Files.rar