Analysis of Tesco 2014/2015 scandal due to the inadequacy of governance mechanism and what can we learn from it.

Order Description
We are required to write an essay regarding to Tesco’s (a UK supermarket company) scandal happen in the period of 2014/2015.
In the essay, the following points have to be included:
1. What happened in the scandal?
2. Who lost anything and what did they lose? Remember to specify in the inadequacy of governance mechanism of the company.
3. What preventative measures could have been taken to prevent this scandal.
Please note that the essay has to be referenced in HAVARD Referencing style and in-text citation is NECESSARY.
Font = Times New Roman
Spacing= 1.5
Margin = at least 25mm
Side style=single sided

Answer
This piece of writing aims to study the corporate governance of Tesco PLC. Tesco is the leader of the retail market in the UK and is ranked as one of the three largest retail enterprises in the world. However, this company has admitted that its half-year profits in 2014 had been artificially inflated by £250m(TheGuardian.com, 2014).It is a poor performance of its weak corporate governance. According to Bebchuk and Ferrell (2008, 783), the definition of corporate governance is the set of rules and regulations that can be complied on the corporations in order to control the business activities. This paper firstly highlights the corporate governance failures that led to this major accounting scandal. Here lists five reasons for governance failure in TESCO PLC below. (1)weak internal control— the board of directors Tesco PLC has acted in accordance with all the provisions of the Cadbury Committee’s Code of Best Practice. It is obvious that the the directors plays an essential role in maintaining effective and efficient corporate governance. According to the COSO framework, the board of directors are responsible for internal control (Woods, 2007). However, the board of directors in Tesco PLC did not comply with the Code of Ethics and EU Audit Directives. The Serious Fraud Office charged three former Tesco executives and four managing directors in the UK suspended after the accounting scandal(Awolowo, 2016, p.23).These punishment was implemented soon after the serious issue, but no attention of the board of directors was paid to the accounting fraud before. The board (including the non-executive directors) and other members of the risk and audit committees seem either to neglect their duties or turn a blind eye to them. Actually in the end,It was an employee who revealed the truth to a lawyer. More seriously, the resignation of Chief Finance Office just before the accounting scandal left the enterprise with no CFO (TheTelegraph, 2014). Plus the fact that CEO was into his new role only two month ago and had many issues to understand. All of this is a sign of poor corporate governance with the absent composition of the board of directors and their neglect of duty. (2)lack of transparency Transparency is built on the free flow of information.When stakeholders concern with the financial situation, they can access processes, institutions and enough information directly to make wise decisions, which shows a great transparency of the company.