It found that Tesco has overstated its profits by £263m for at least two years, not six months as was previously thought, and by £13m more than the initial estimate.
The accounting practices resulted in profits being overstated by £118m in the first half of this year, by £70m in the 2013-2014 financial year and by £75m before that, which could pose questions for auditors PwC.
The issue concerns when payments received from suppliers who pay to run in-store promotions on their behalf are booked.
Sir Richard Broadbent
The issues that have come to light over recent weeks are a matter of profound regret
First half profits fell by a massive 92% while Tesco's share price plummeted 7% following the statement this morning.
The results of the investigation have been passed to regulators including the Financial Conduct Authority. The Financial Reporting Council has previously stated it is watching events at Tesco “closely”.
Tesco chief executive Dave Lewis said that the probe did not reveal any suggestion of fraud or personal gain. “The Deloitte investigation has established the what but the FCA investigation will establish the why and how,” he said. “Nobody gained financially as a consequence of the overstatement of performance.”
Chairman Sir Richard Broadbent announced his resignation in the wake of the news, while eight executives have been suspended since the accounting scandal broke last month.
Sir Richard said, "The issues that have come to light over recent weeks are a matter of profound regret. We have acted quickly to clarify the financial performance of the company.
"A new management team is in place to address the root causes of the mis-statement and to develop and implement the actions that will build the company's future," he added.
In a further blow, Tesco has also scrapped its profits outlook after warning that full year profitability could be further impacted. In a statement it said, “There are a number of uncertainties which limit visibility of future performance. We will do the right thing for customers - and therefore the business - despite these uncertainties. For these reasons we are not providing full-year profit guidance.”
While Britain’s biggest supermarket chain has been battling strengthening competitors, evolving consumer trends and management upheaval for a number of years, the current crisis began when it announced it had overstated profits by £250m on 22 September.
Tesco attempted to draw a line under the investigation this morning by outlining its future priorities. It said, "We have three immediate priorities. The first is restoring competitiveness in our core UK business.
"The second is protecting and strengthening our balance sheet. The third is to begin the long journey of rebuilding trust and transparency in the business and the brand."
An eventful six months for Tesco...
07 April 2014: Tesco CFO Laurie McIleew announces his decision to stand down, ahead of Tesco’s full year results, which are expected to drop 10%. Tesco assures investors McIleew will oversee the handover with the replacement CFO.
16 April 2014: Tesco announces a 6% profit drop, making 2014 the second year in a row that profits had fallen.
10 July 2014: Marks & Spencer confirms its CFO, Alan Stewart, will join Tesco after a period of garden leave.
21 July 2014: Philip Clarke is sacked after three years as CEO, following a failure to halt slides in sales, profits, and customer defections. Dave Lewis of Unilever is announced as his replacement.
29 August 2014: Lewis’ start as CEO is brought forward one month as Tesco issues a shock profit warning and an interim dividend cut.
22 September 2014: Tesco admits profits were overstated by £250m and calls on Big Four firm Deloitte to investigate the matter. Four executives, including UK managing director Chris Bush, are suspended.
23 September 2014: Tesco announces that Stewart is to start immediately after an effective plea to M&S to waive its garden leave requirement.
24 September 2014: The Financial Reporting Council (FRC) – the accounting watchdog – reveals that it is watching events at Tesco “closely”.
25 September 2014: Tesco admits that McIleew has not made any decisions for five months, leaving the supermarket to address financial woes without a CFO. It emerges that Lewis had set up a separate finance team for the interim period.
1 October 2014: The Financial Conduct Authority (FCA) launches its own investigation into accounting standards at Tesco.
7 October 2014: Kevin Grace, Tesco’s group commercial director, is asked to step down.
14 October 2014: Three more executives are asked to step down.
23 October 2014: Tesco confirms profit hole is actually £263m. The beleaguered supermarket’s chairman, Sir Richard Broadbent, announces he will step down. The store admits a 92% fall in profits, with like-for-like sales down 4.6% for the 26 weeks to 23 August.