British retailer WH Smith’s board has advised shareholders to retain PwC as its auditor, even after the accounting firm failed to uncover a misstatement of profits in the company’s North American division, reported the Times.
The issue, which came to light in August, resulted in a substantial decline in WH Smith’s market value and has attracted regulatory scrutiny.
The Financial Conduct Authority began investigating the retailer after it was revealed that profits had been overstated for several years.
The disclosure led to the resignation of CEO Carl Cowling in November and saw nearly £600m ($808m) erased from WH Smith’s market capitalisation in a single day.
The Financial Reporting Council (FRC) is also considering whether to open a separate investigation into PwC’s audit work, as per a report by the Financial Times in November.
Despite these events, WH Smith’s board said over the Christmas period that it will “unanimously” recommend PwC’s reappointment at the company’s upcoming annual meeting in February.
Chief financial officer Max Izzard stated last month that he continues to have “confidence” in PwC and intends to maintain their working relationship.
“We have been working really closely with PwC over recent months and have enjoyed a longstanding relationship with them,” Izzard told the Times.
PwC has audited WH Smith since 2014, following the end of Deloitte’s 65-year spell with the company during a time of regulatory pressure on companies to rotate auditors more regularly.
In recent years, PwC has faced other reputational challenges including involvement in a tax affair in Australia and its auditing of Evergrande, the Chinese property developer found to have overstated its sales.
Following the profit misstatement, WH Smith shares have lost more than 40% of their value across six months, reported the publication.
The retailer’s headline profit before tax for the year ending 31 August 2025 stood at £108m.
It also plans to shut several unprofitable stores in North America.
The company is seeking to recoup more than £1.5m in bonuses from Cowling and former finance chief Robert Moorhead.
Shareholders will be asked next month to approve a final dividend reduced to 6p per share from 22½p last year, as well as a new long-term incentive scheme.
Principal shareholders include Causeway Capital, Artemis Investment Management, Royal London Asset Management and activist investor Palliser Capital, which holds 5%.
PwC declined to comment on the matter.
“WH Smith asks shareholders to support PwC despite audit error” was originally created and published by International Accounting Bulletin, a GlobalData owned brand.
