Tesco Chief Executive Dave Lewis. European Pressphoto Agency
LONDON— Tesco  PLC has suspended four senior executives and called in outside auditors and legal counsel to investigate the £250 million ($408.8 million) overstatement of the U.K. supermarket operator's forecast profit for this year.
Tesco's newly-installed chief executive Dave Lewis said on Monday that the company has uncovered a "serious" accounting issue.
The issue involved the early booking of revenue and delayed booking of costs, the company said, triggering a third profit warning in three months. Tesco, which has done a preliminary investigation into its U.K. food business, said it doesn't suspect illegal activity.
"We have uncovered a serious issue and have responded accordingly," said Mr. Lewis, the former Unilever executive who took up the reins at Tesco on Sept. 1, a month earlier than expected.
Mr. Lewis said the issue surfaced on Friday when an "informed" employee went to the company's general counsel. Tesco has contacted its regulator, the Financial Conduct Authority, Mr. Lewis said. "We've done everything we need to do," he said.
Tesco's shares plunged in early trading Monday, falling as much as 11%, before rallying slightly. The stock is trading at its lowest level since the fall of 2003.
Last month. the U.K.'s largest retailer cut its profit guidance for the year to between £2.4 billion and £2.5 billion.

The U.K. group, which vies withCarrefour SA of France for the position of world's second-largest retailer behind Wal-Mart Stores Inc., WMT +0.81% is struggling against fierce competition in its key home market."The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear," Mr. Lewis said.
Customers have traded up for higher-end grocery stores or looked for cheaper alternatives from discount retailers. Tesco has focused heavily on international expansion and made several costly missteps in the U.S. and China.
The latest issue poses a particular challenge for Tesco's new boss.
The company had unloaded a raft of bad news, including a profit warning and a 75% cut in its interim dividend, the week before Mr. Lewis started in the hope of ensuring he began his new job with a clean slate.
Traders and analysts were jolted by the news. Marc Kimsey, a senior trader at Accendo Markets, put it bluntly: "Tesco is no longer a viable investment."
"These are serious times for Tesco and its shareholders," analysts from Shore Capital said in a trading note. "We are flabbergasted by this development."
Tesco has issued four profit warnings since January 2012, when it issued its first in 20 years.