Britain’s Financial Reporting Council (FRC) announced on Monday that it is investigating PwC’s audit of retailer WH Smith after a £30 million overstatement in the company’s US earnings came to light. The scandal forced former chief executive Carl Cowling to resign and has put the long‑standing auditor under intense shareholder pressure.

FRC launches probe into PwC over WH Smith audit

The FRC said it will examine whether PwC complied with UK auditing standards when it signed off WH Smith’s 2023 accounts. According to the regulator’s statement, the inquiry will focus on the audit trail surrounding the US division’s profit figures, which were later found to be inflated by £30 million. The investigation comes as the watchdog steps up scrutiny of listed companies after a series of high‑profile accounting failures.

£30 million US profit overstatement triggers board shake‑up

WH Smith’s former boss Carl Cowling stepped down in November after Deloitte‑led analysts uncovered the profit misstatement. The error emerged just as the retailer was shifting its strategy toward travel‑shop locations in airports, a move that now appears to have been built on shaky financial foundations. The company’s chief financial officer Max Izzard publicly defended PwC’s role, but the damage to investor confidence was already evident.

Ian Quinn’s turnaround mandate targets US acquisitions

Executive chairman Ian Quinn, parachuted in from a successful stint reviving construction giant Balfour Beatty, has been tasked with stabilising the business. Quinn, who took the helm in April, announced a strategic review that will prioritize the US segment, which grew through a series of acquisitions. He aims to disentangle the overvalued assets and restore transparent reporting before the retailer’s next annual general meeting.

Shareholder advisory Pirc urges vote against PwC

Ahead of the February AGM, shareholder advisory group Pirc issued a recommendation for investors to vote against re‑electing PwC as WH Smith’s auditor, ending a decade‑long relationship. the advisory cites the audit failure and the regulator’s probe as evidence that the firm can no longer be trusted to safeguard the retailer’s financial integrity. If the vote succeeds, WH Smith will need to appoint a new auditor before the next reporting cycle.

Who will replace PwC as WH Smith auditor?

The most pressing unanswered question is which firm will step in if shareholders reject PwC. While Deloitte identified the misstatement, it is not clear whether the regulator will allow the same firm to take over the audit.. Moreover, the FRC has not disclosed whether any other audit firms are under consideration, leaving the market speculating about potential bidders.