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5 Things that mattered 15/10/18

The big events of the last week including the trial of former Tesco directors following a £250m profit overstatement at the grocer and accounting irregularities discovered at Patisserie Valerie.

Tesco directors on trial

Two former directors at Tesco go on trial, accused of manipulating figures that resulted in the firm’s profits being overstated by £250m. Chris Bush, Tesco’s former UK managing director, and ex-UK food commercial director John Scouler are each charged with one count of fraud and false accounting.

The group’s former UK finance director Carl Rogberg, charged with the same offences, is not well enough to stand trial.

Tesco chief executive Dave Lewis tells a court of his “genuine shock” on learning of the £250m overstatement of the company’s profits. Lewis says he had “no indication at all” of the issue until brought to his attention by the supermarket group’s legal department.

Auditors under spotlight

The Financial Reporting Council (FRC), the accounting watchdog, lays out a series of reforms to tackle the “underlying falling trust in business and the effectiveness of audit”.

It also severely rebukes Big Four accountancy firm KPMG, the auditor of collapsed outsourcing giant Carillion, finding “a deterioration in the quality of the audits that we inspected to an unacceptable level”.

The Competition and Markets Authority (CMA) says it would probe whether the sector is “competitive and resilient enough to maintain high quality standards”.

The sector “is not working well for the economy or investors”, the CMA adds.

IMF on global prospects

In its Financial Stability Report the International Monetary Fund (IMF) paints a disturbing picture.

It says that although banks are far safer than they were in 2008 there are new risks, trade tensions are growing and that moves towards a trade war could “significantly harm global growth”.

Other threats to trade, such as a disorderly Brexit, could also “adversely affect market sentiment”, says the IMF.

Ethnicity pay gap review plans

Corporates may be required to reveal their ethnicity pay gap under plans unveiled by the Prime Minister to help minorities at work.

Theresa May has launched a consultation on whether mandatory reporting will help address disparities between the pay and career prospects of minorities.

Patisserie Valerie in crisis

“Significant, and potentially fraudulent, accounting irregularities” are discovered at cake shop chain Patisserie Valerie, resulting in the arrest and then release of Chris Marsh, finance director of the chain’s owner Stonebeach.

Luke Johnson, who owns 37% of the firm through his vehicle Risk Capital Partners, injects up to £20m into the group which employs 2,500 people at its 200 outlets and was valued at £440m at the start of the week.

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