TESCO has formally been placed under criminal investigation by the Serious Fraud Office (SFO) following its discovery of a £263 million hole in profit expectations.
The group said that in light of the SFO probe, a separate investigation by the Financial Conduct Authority (FCA) had been closed.
The move comes after a probe for Tesco by accountants Deloitte and law firm Freshfields found the accounting error was worse than first thought and that the supermarket had been overstating its earnings for years.
In a statement, the group said: "Tesco confirms that it has been notified by the Serious Fraud Office 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 confirmed its director David Green, QC, "has opened a criminal investigation into accounting practices at Tesco plc". It said that as the investigation was under way it could not provide further details.
The SFO is responsible for investigating and prosecuting serious and complex fraud and corruption.
The FCA confirmed that it had "decided to discontinue its own investigation with immediate effect".
Accounting watchdog the Financial Reporting Council has also said it is "giving careful consideration" to whether it should take regulatory action.
Last week, Tesco said pay-offs totalling about £2 million to departed chief executive Philip Clarke and former finance director Laurie McIlwee had been suspended pending investigations.
Meanwhile, eight executives including UK managing director Chris Bush have been asked to step aside.
Chairman Sir Richard Broadbent last week said that he was preparing to step down to show someone was "carrying the can" for the scandal - which was "a matter of profound regret".
Deloitte's probe into the affair, which involved rebates from suppliers being moved around to different periods on the company's balance sheet, found it had been going on for years and at least as far back as the 2012/13 period.
New chief executive Dave Lewis tried to draw a line under the episode as he unveiled details of the inquiry while reporting a 92 per cent fall in first-half profits and deteriorating sales last week.
But Tesco has now had to re-write its rules on dealing with suppliers in light of the mistakes and said this would have an impact on its second- half performance.
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