THE accounting watchdog has launched an investigation into Tesco's £263m overstatement of profit expectations.

The Financial Reporting Council (FRC) says it will focus on financial figures reported and prepared by the UK's largest supermarket and auditor PwC.

The scandal is already being investigated by the Serious Fraud Office and has seen a number of Tesco executives leave or be suspended.

Chairman Sir Richard Broadbent is also stepping down.

Tesco announced in September it had discovered an accounting problem relating to expected results for the first half of the current financial year.

A subsequent probe by Deloitte into the affair, which involved rebates from suppliers being moved to different periods on the company's balance sheet, found it had been going on at least as far back as the 2012/13 period.

The FRC has already said it was "giving careful consideration" as to whether it should take regulatory action.

The investigation will cover members of professional accountancy bodies, from either Tesco or its auditors, who were involved with the accounts, as well as the member firm, PwC, which was and remains Tesco's auditor.

In a statement, PwC said: "We take our responsibilities very seriously and remain committed to delivering work to the highest professional standards.

"We will co-operate fully with the FRC in its inquiries."