The board of WHSmith has thrown its support behind chief executive Carl Cowling despite a sharp fall in the retailer’s share price after revelations it had overstated profits.

The UK-based company, which operates 50 stores in Australia, is under investigation by Deloitte to determine whether the accounting issue was limited to last year’s results or if it stretches back further. The probe is expected to take six to eight weeks, according to the Financial Times.

WHSmith Melbourne T3. Image: GS Projects/Facebook.

A recent review found WHSmith had been recording supplier income prematurely, inflating profits by an estimated A$62 million. The company now expects pre-tax profit to fall to about A$227 million for the year ended 31 August, with the problem believed to be confined to its US travel business.

Despite the accounting setback, WHSmith’s largest shareholder, Causeway Capital, increased its stake from 12% to 15.7%, stock exchange filings show.

Sources close to the company said the board is standing by Cowling for now, noting WHSmith’s history of succession planning.

Earlier this year, WHSmith sold its UK high street business to Modella Capital, the owner of Hobbycraft, for £76 million. The deal included the transfer of 480 stores as the retailer shifted focus exclusively to its travel retail division.