In September 2014, Amit Soni, a senior accountant in Tesco Stores Limiteds (TSL) finance department filed a report with Tescos legal team. Soni was concerned about TSLs handling of commercial income, an income statement item that accounted for differences between inventorys purchase price and list priceto be used, for example, when a vendor offered TSL a discount for buying inventory in bulk. According to the accountants allegations, TSL employees had been inflating commercial income to meet the divisions financial targets, causing Tescos projected trading profit for the six months ended August 23, 2014 to be overstated by an estimated 246 million. Tescos legal team had quickly referred the issue to CEO Dave Lewis, who had started in the role just a few weeks earlier, on September 1. Lewis had to decide how to respond to these allegations. Did the allegations have merit, and what were the causes for the accounting violations? Should managers be removed if Tesco determined that the allegations had merit? What were the legal consequences for Tesco, and how should Tescos organizational structure and culture evolve?

1. What are your recommendations to Dave Lewis on how to respond to these allegations? What would you change at Tesco to avoid such scandals going forward? (20 points)

• You should discuss on how Tescos new CEO should respond to these allegations, and potential changes to Tescos corporate governance to avoid similar issues in the future. You may focus on immediate actions, short-term actions (over the next quarter) or next quarters.