PwC under investigation over accounting scandal at WH Smith
The accountancy watchdog has launched an investigation into PwC over its audit of WH Smith, following a financial scandal at the retailer.
The Financial Reporting Council (FRC) confirmed that it has opened a probe into the Big Four beancounter’s audit of the retailer’s financial statements for the year to 31 August 2024.
WH Smith, which hopes to be a ‘one stop travel shop’ business after selling its High Street division, is already being investigated by the City watchdog over potential breach of listing and disclosure rules.
The retailer’s former boss Carl Cowling stepped down last November after it was revealed that profits in its US division were overstated by £30million because income from suppliers was booked early.
But now PwC has come under scrutiny for signing off on WH Smith’s accounts before the scandal was uncovered by experts at Deloitte.
PwC said: ‘We will be fully co-operating with the FRC’s investigation. The delivery of high-quality audits is fundamental for the firm and we are committed to maintaining high standards.’
Probe: Watchdogs are investigating the accounting scandal at WH Smith
Ahead of the retailer’s annual meeting in early February, shareholder advisory group Pirc urged investors to vote against re-electing PwC, the firm’s auditor for more than ten years – contrary to best practice.
And while the resolution to re-elect the company passed – just under 15 per cent of investors voted against – it left PwC with a bloody nose.
Chief financial officer Max Izzard threw his support behind PwC and their future as the company’s auditors last year.
He told The Times: ‘We’ve been working really closely with PwC over recent months and have enjoyed a longstanding relationship with them. We remain confident with them and in the year ahead still working with them’.
WH Smith was thrown into chaos after the accounting blunder was revealed, which came just as it had pivoted its business towards travel shops in airports.
In August, it was revealed that sales that should have been allocated to later years were recorded as soon as promotional deals were done.
This first update wiped almost £600million off the value of the company’s shares trading on the London stock market in one day. Shares are still down 54 per cent since then.
The retailer is now being led by Ian Quinn, who started as executive chairman in April.
He has been parachuted in to sort out the mess after reviving construction giant Balfour Beatty.
The focus of his strategic review will be on the US business, which was built up by a series of acquisitions, a source familiar with his thinking told The Mail on Sunday earlier this year.
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