An investigation has been launched into the supermarket chain after it overstated its half-year profit guidance by £250m, resulting in the suspension of four executives including the UK managing director.
The investigation will be carried out by Deloitte the groups external legal advisers, Freshfields.
Tesco shares have plummeted by 12pc, making them the biggest faller in the FTSE 100 index.
The overstatement was discovered on Friday when a report into the UK food business showed the first-half profit was being prepared to publish. The group is currently working out the extent of the problem and the effect it will have on annual profits.
In August, shares hit an 11-year low after the firm cut its full year profit forecast to £2.4bn from £2.8bn. Tesco has been battling decline and a fall in sales whilst discount stores such as Lidl and Aldi have gained popularity. The supermarket has issued a series of income warnings in the past year in spite of posting profits of £3.3bn last year.
Chief executive Dave Lewis, who started in his role on September 1st, took control of Tesco after the former boss Philip Clarke failed to halt a slide in profit and sales. Clarke was preparing to celebrate 40years with the retailer but was ousted by the board in late July.
Tesco recruited Alan Stewart from Marks & Spencer in July as their new finance director but is not set to officially join until December. Laurie Mcilwee left the board back in April after resigning as finance director but agreed to stay on to hand over to his successor.
The major accounting failure has forced Tesco into delaying its first half results from the 1st of October to the 23rd of October.