Regulator opens probe into PwC over WH Smith audit debacle

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Professional Services Editor

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The Financial Reporting Council (FRC) has launched an investigation into PwC over its audit of WH Smith that resulted in delayed annual results last year.

Last August, WH Smith shares plummeted by up to 40 per cent after it admitted to an accounting error that overstated expected headline trading profit in its North American business by around £30m. This followed an independent review by Deloitte, which found a number of “shortcomings” in the FTSE 250 company’s accounts.

The accountancy scandal, which wiped nearly £600m off the group’s stock market valuation in a single day last Summer, resulted in WH Smith’s then-chief executive, Carl Cowling, resigning from the business.

Last year, the business signed a deal to sell its High Street stores to private equity firm Modella, owners of HobbyCraft, leaving the only remaining WH Smith stores in train stations and airports. The high street outlets around the country were rebranded with the new moniker TG Jones.

Watchdog green lights probe

For 65 years, the firm was audited by Deloitte, but in 2014, PwC was appointed as an external auditor for the FTSE 250 retailer.

Despite the accountancy error, it was reported in January that WH Smith urged shareholders to back its auditors, PwC, as the board said it “unanimously” recommended that shareholders reappoint the Big Four giant.

It was reported last year that the FRC were considering formally investigating the Big Four firm. On Tuesday, the audit watchdog confirmed it had commenced an investigation into the statutory audit of WH Smith’s consolidated financial statements for the financial year ended 31 August 2024, conducted by PwC. The decision was made at a meeting of the FRC’s conduct committee on 21 April 2026.

Earlier this week, a new report highlighted that for the first time in nearly eight years, PwC has lost its iron grip on clients from London’s blue-chip index, following a historic three-way tie with two of its competitors for clients at the top of the FTSE 100 audit rankings.