answer the question properly. please .it has 20 points

Case Synopsis

In September 2014, Amit Soni, a senior accountant in Tesco Stores Limiteds

(TSL) finance department filed a report with Tescos legal team. Soni was

concerned about TSLs handling of commercial income, an income statement

item that accounted for differences between inventorys purchase price and list

priceto be used, for example, when a vendor offered TSL a discount for buying

inventory in bulk. According to the accountants allegations, TSL employees had

been inflating commercial income to meet the divisions financial targets, causing

Tescos projected trading profit for the six months ended August 23, 2014 to be

overstated by an estimated 246 million. Tescos legal team had quickly referred

the issue to CEO Dave Lewis, who had started in the role just a few weeks

earlier, on September 1. Lewis had to decide how to respond to these

allegations. Did the allegations have merit, and what were the causes for the

accounting violations? Should managers be removed if Tesco determined that

the allegations had merit? What were the legal consequences for Tesco, and

how should Tescos organizational structure and culture evolve?

Learning Objective

This case study brings up a broad understanding of corporate leadership,

corporate misreporting, financial reporting and control, corporate governance,

reasons facilitating accounting fraud, leaders responses to such fraud, and

regulators and courts enforcement decisions against firms and individuals.

Specifically, this case consists of three separate parts (cases A to C). We will

cover Case A, which allow for discussions on the nature as well as reasons for

the underlying accounting problem.

The case focuses on Amit Soni, a senior accountant in TSLs finance

department, who filed a report with Tescos legal team. Soni claimed that TSL

pulled forward commercial income to meet the divisions financial targets, leading

to a total overstatement of approximately 246 million for the six months ended

August 23, 2014. This potential accounting fraud allows you to understand the

accounting mechanics of commercial income and to ultimately debate the merits

of the whistleblowers allegation. Furthermore, it allows for reflection on factors

leading to the fraud, and appropriate responses to this fraud from the point of

view of the new CEO, Dave Lewis.

This case study aims three main learning objectives:

1. Understand the mechanics of accounting for commercial income, an important

source of income for retailers.

2. Understand the drivers of corporate misconduct, and the role of various

governance mechanisms within and outside of the firm to curtail

misconduct.

3. Assess the appropriateness of a firms response to accounting fraud, and the

firms design of new control systems.

1. Do you agree with Amit Soni that Tescos accounting for commercial

income constitutes accounting fraud? (20 points)

You may start by bring up various issues related to different aspects of the

case. For example, you might discuss the specifics of the accounting issue

(accounting for commercial income), highlight the internal and external

factors that could have contributed to the misconduct (e.g., performance

pressure, weak control systems, etc), or criticize the behavior of Tescos

managers.

4. What are your recommendations to Dave Lewis on how to respond to

these allegations? What would you change at Tesco to avoid such

scandals going forward? (20 points)

You should discuss on how Tescos new CEO should respond to these

allegations, and potential changes to Tescos corporate governance to

avoid similar issues in the future. You may focus on immediate actions,

short-term actions (over the next quarter) or next quarters