50 million it would have recovered the fictitious or

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£50 million it would have recovered the fictitious or premature income already recognized. However, if the next year brought another £50 million hole, Tesco would be forced to borrow the entire £100 million from another future period. Defendants Knowledge of Improper Accounting PracticesDefendant Clarke himself is credited with creating a culture of desperation and recklessness within Tesco. One source stated that Clarke was putting huge pressure on people to deliver the numbers and that the phrase that came out was “Idon’t care how you do it, just do it.” In this way, insiders suggested that “they were pushed to the limit to improve performance.” According to The Sunday Times, the very same Tesco employee who alerted new CEO David Lewis to the company’s improper accounting practices, raised the concerns while Defendant Clarke was CEO, but was ignored. Lewis was able to confirm the extent of the accounting issues over the course of a single weekend, underscoring that Defendant Clarke was severely reckless in ignoring the whistleblower’s caution.
In addition to hiding the company’s falling margins from the public and keeping their high-paying executive jobs, Defendants McIlwee and Clarke were personally motivated to misrepresent Tesco’s financial condition because executive bonuses were largely tied to the financial performance of Tesco. Tesco was only able to report revenue and sales growth through the Class Period by improperly recognizing commercial income from premiums, discounts andrebates that Tesco claimed from its suppliers for supporting promotions or for reaching certain volume purchase targets. Premiums and rebates are not uncommon practices in the supermarket business, but Tesco violated accounting rules by reporting such commercial income fictitiously and prematurely, and by taking advantage of UK accounting rules that did not require separate disclosure of supplier-based income. Without these improper accounting practices, Tesco would have reported significantly lower revenue, higher cost of sales and materially lower amounts of profits and income.Role of External AuditorPwC is currently under investigation by the FRC for its audits for its Tesco auditsin 2011/12, 2012/13, and 2013/14. The most recent Public Company Accounting Oversight Board (“PCAOB”) audit inspection report on PricewaterhouseCoopers LLP (London, UK), is dated October 1, 2013, based on 2011 reviews. The PCAOB concluded the following: “The deficiencies identified included a deficiency of such significance that it appeared to the inspection team that, in one of the audits performed by the Firm, the Firm, at the time it issued its audit report, had not
obtained sufficient competent evidential matter to support its opinion on the issuer's financial statements.” The audits of PwC do nothing to exculpate Tesco. Auditors have a long andestablished history of missing massive frauds. Further, the circumstances in which auditors most often overlook fraud were all present at Tesco. For example, Tesco

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