UK telco BT has admitted an accounting scandal in its Italian operation is ‘far greater than previously identified’, resulting in a share-price plunge and executive sackings.

BT had previously admitted £145 million worth of Italian book-cooking in October of last year but ahead of its latest round of quarterlies it has decided to confess that further investigations have revealed that was just the tip of the iceberg.

‘These investigations have revealed that the extent and complexity of inappropriate behaviour in the Italian business were far greater than previously identified and have revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions,’ said the BT announcement. “These activities have resulted in the overstatement of earnings in our Italian business over a number of years.

“The investigation into the financial position of our Italian business is now substantially complete. The adjustments identified have increased from the £145m announced in our half-year update to a total of around £530m. We are still evaluating what proportion of the total adjustments should be treated as prior year errors, and what proportion should be treated as the reassessment in the current year of management estimates.”

Using the apparently obligatory word ‘wiped’ the media have been quick to point out that the immediate BT share price decline of around 18% has lowered the overall value of the group by billions of pounds. On first look this seems like a bit of an over-reaction to half a billion pounds’ worth of moody money but BT’s share price has been in steady decline for a year, so this seems to be just the latest knock to investor confidence.

Other business divisions, including public sector, seem to have disappointed last year, and debts including the cost of acquiring EE and a hefty pension deficit are further elephants in the room. When investors are already jittery an unexpected negative such as this can all that is needed to make them dump the stock.

“We are deeply disappointed with the improper practices which we have found in our Italian business,” was BT CEO Gavin Patterson’s superfluous canned comment. “We have undertaken extensive investigations into that business and are committed to ensuring the highest standards across the whole of BT for the benefit of our customers, shareholders, employees and all other stakeholders.”

There has already been understandable carnage among the BT Italy executive team, much of which seems to have decided to spend more time with their families. The Beeb is also reporting that Corrado Sciolla, former head of BT Italy and now President of the whole of continental Europe for BT is also moving on.

The accounting issue itself will presumably be dealt with quickly and conclusively. The greater long-term damage may be to the professional reputation of Patterson and his team. At a time when a number of other parts of the business are under scrutiny, allowing an entire division to cook the books for several years is hardly a sign of reassuring competence.