Britain's accounting watchdog has called off its probe into the role played by consultancy firm PwC in the Tesco accounting scandal.

The Financial Reporting Council motivated its decision by saying there was "not a realistic prospect" that PwC would be found guilty of misconduct.

The two-and-a-half-year investigation was launched after Britain's largest retailer revealed in September 2014 it had previously overstated its profits by £263m ($326.03m), which it later revised up by £63m.

The investigation focused on the role PwC, which was Tesco's external auditor, played in the preparation, approval and audit of the retailer's financial results in the previous four years.

"The Executive Counsel to the FRC has concluded that there is not a realistic prospect that a tribunal would make an adverse finding against PwC and certain members in respect of the matters within the scope of the investigation," the watchdog said on Monday (5 June).

A spokesperson for PwC added: "We cooperated fully ​during the FRC​'s​ thorough ​investigation and
are pleased that​ ​the FRC has closed it without any further action."

The FRC, which last year closed an investigation into Tesco's former Chief Financial Officer, Laurie McIlwee saying there was not a realistic prospect of proving misconduct, added it would continue investigating other Tesco auditors.

The Serious Fraud Office (SFO) launched a separate inquiry into the profit overstatement case in October 2014 and, in March of this year, Tesco agreed to pay a £129m fine after reaching a deferred prosecution agreement with the SFO.

Last week, it emerged that Tesco's chief executive Dave Lewis will appear as a witness in the trial involving three former executives of Britain's largest retailer.

Apart from Clarke, several other senior Tesco executives were interviewed over the accounting fraud.

In September 2016, the SFO said that it is charging three former executives; Christopher Bush, managing director of Tesco UK, Carl Rogberg, the ex-finance director, and John Scouler, the former commercial director in connection with the profit overstatement at the retailer.

The three executives have been charged with one count of fraud and one count of false accounting each. They could face up to 10 years in jail if found guilty of fraud by abuse and a maximum of seven years for false accounting.