WHSmith’s Australian operations, which include more than 60 stores in airports, rail hubs and universities, are under scrutiny after the UK’s Financial Reporting Council (FRC) signalled it is weighing a formal investigation into PwC. The move follows a series of accounting errors that triggered a collapse in the retailer’s share price and forced the resignation of its global chief executive.

The retailer revealed last week that profits in its North American division had been overstated by recognising supplier income far earlier than allowed under its accounting policies.

In August, WHSmith, which owns brands including InMotion, Gadgetshop and Zoodle, disclosed initial concerns about irregularities in the division, prompting a 40% crash in its share price – one of the worst single-day drops for a major UK retailer.

PwC, WHSmith’s auditor since 2015, had signed off on the financial statements covering the years now confirmed to contain inflated earnings. While PwC alerted the regulator when WHSmith first flagged the issue, the FRC is now assessing whether the firm’s audits fell short of required standards.

The watchdog has powers to issue multimillion-dollar fines and ban individual auditors but has not yet decided whether to escalate to a full investigation.

A review by Deloitte pointed to a “target-driven performance culture” within WHSmith’s US business and limited financial oversight from the company’s UK headquarters. It confirmed the issues stretched over several years, with inadequate financial controls and systems inside the North American arm.

The investigation found that supplier payments tied to in-store promotions were logged as income when deals were signed – rather than over the period in which sales occurred – artificially boosting reported profitability and helping senior executives hit performance bonuses.

WHSmith Group CEO Carl Cowling resigned last week, acknowledging the seriousness of the findings despite the issues originating in the US division. The retailer is also replacing its entire North American finance team.

The scandal has wiped nearly £600 million off WHSmith’s market value and forced the company to prepare restatements for its 2023 and 2024 earnings. Forecasts for its 2025 US trading profit have been cut to £5–£15 million, down from earlier guidance of £25 million.

WHSmith has not confirmed whether it will retain PwC as auditor at its next shareholder vote. Both PwC and the FRC have declined to comment.