The Serious Fraud Office (SFO) has launched a formal criminal probe into Tesco's accounting crisis that led the UK's biggest retailer to overstate profits by £263m.
The news was confirmed by both the supermarket chain and SFO, hours after Sky News first revealed details of the investigation.
The company said: "Tesco confirms that it has been notified by the SFO that it has commenced an investigation into accounting practices at the company.
"Tesco has been co-operating fully with the SFO and will continue to do so.
"Tesco has been notified by the Financial Conduct Authority that, in light of the SFO investigation, its investigation will be discontinued."
The SFO probe, while not entirely unexpected, adds to the sense of crisis at Tesco.
The company, which has lost more than half its value during the last year, has been hit by unprecedented boardroom turmoil, with the chairman, Sir Richard Broadbent, planning to quit next year.
Eight executives, including UK managing director Chris Bush, have been asked to stand aside pending the outcome of investigations into the accounting mis-statement, which relate to payments from major suppliers.
Deloitte, the accountancy firm, and Freshfields, Tesco's legal adviser, undertook a preliminary probe, which was handed to the retailer's board last week.
That report has been handed to the Financial Conduct Authority (FCA), with which Tesco said earlier this month it is co-operating.
Dave Lewis, the new Tesco chief executive, last week unveiled a fall in half-year profits of more than 90% as the company battles to recapture market share lost to discounters such as Aldi and Lidl.
Tesco has also been deserted by some of its leading shareholders, including the US-based Harris Associates and Warren Buffett's Berkshire Hathaway, amid concern over its strategy and the state of its balance sheet.
The turmoil has forced Tesco to shore up its financial position by turning to five banks to lend the company £1bn each in order to head off the prospect of lenders calling in existing loans.
The Daily Telegraph reported on Wednesday that major consumer goods companies which supply Tesco have asked auditors to scrutinise their dealings with the retailer.
The SFO, which has powers to prosecute companies as well as individuals, has been pursuing high-profile cases against Barclays, GlaxoSmithKline and Rolls-Royce, among others.
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