After a bit of an absence, no sooner do I post about the UK Tesco scandal, than my news tag delivers a result that the former head of wine, spirits, and beer, Dan Jago, is returning to a previously held role at Tesco—cleared of any criminal involvement in the scandal that overstated the UK retailer’s books by 263 million pounds ($408 million USD).
I wonder if this clears the adult beverage sector of Tesco from any contribution to the profit misreporting? Several key people have left, and, in fact, you have to read between the lines to discover that someone like Jago is returning to report to someone who is now holding the role he had been promoted into some four weeks before the scandal broke. One of the several articles suggests that the focus of the criminal investigation is on the interplay between senior management and the accounting department. As someone familiar with how books are kept, it still seems very hard to accept that the investigators would not already know the answers they are seeking. In double entry accounting, when one side of an entry (for example, sales revenue) is made, there must an entry that supports it in another account (say, accounts receivable).
If sales revenue were being overstated, someone booked that. They were instructed to book it. And there is an offsetting collectable, somewhere.
Could this purely be a fraud involving the accounting department? Yes. But that does not seem to be where the probabilities would lie. I still feel that the main theory, that vendor accounts with alcohol suppliers are one of the main sources of the discrepancy, is still out there as a strong possibility, even if one executive is cleared of having a direct hand in the fraud.