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Insta Ethics 70 Days Plan 2021 – Day 42


Day –  42



1) In the year 2014, Tesco, UK’s largest retailing giant, was plunged deeper into a corporate governance crisis. It was a corporate scandal in which the company overstated its profits. Tesco had overstated the profits of the company to be £1.1bn, but later on, it was revealed that the company had experienced a profit of £263m. This overstatement of the profits in the forecasted profit figures was to attract shareholders and to increase investments. Following the accounting fraud, Tesco was asked to pay £500m fine by the end of the year and also four senior executive directors of the company were suspended, for their involvement in the scam. On analysis, it was found that the overstatement of profits was possible due to vacancy of the post of Chief Financial Officer. The other remaining stakeholders who are responsible for ensuring accounting standards and norms are:

    1. Internal audit committee
    2. External audit committee—a private firm
    3. Independent directors.

Answer the following questions:

    1. What are the corporate-governance norms that are not upheld in this case?
    2. Who among the three stakeholders responsible for monitoring compliance to accounting norms is most responsible for failing to detect the scam? Justify your stand.


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