We looked here at the following announcement by the retailer WH Smith PLC:

• In preparation for the Group’s year end results for the financial year ending 31 August 2025, a current financial review has identified an overstatement of around £30m of expected Headline trading profit in North America. This overstatement is largely due to the accelerated recognition of supplier income in the North America division.

The company announced at the time that the Board had “instructed Deloitte to undertake an independent and comprehensive review.” The company has now issued a summary of the review:

• Independent and comprehensive review undertaken by Deloitte LLP (the “Deloitte Review”) for FY23 to FY25 has been delivered, following announcement on 21 August 2025.
• Key findings identified:
  • the accounting treatment for supplier income adopted by the North America division was not consistent with the Group’s stated accounting policy and consequently was not consistent with the requirements of the relevant accounting standards;
  • supplier income recognition has been overstated in North America. As a result of this finding, the Company expects prior year adjustments to be recorded;
  • the overstatement of supplier income identified in the North America division is substantially a timing rather than an existence issue, and relates to the application of accounting standards; and
  • the methodology and conclusion of the Internal Audit review of supplier income for FY25 across the UK and ROW Travel divisions is appropriate and supplier income has been appropriately recognised in these divisions.
• The North America supplier income issue has arisen against a backdrop of a target-driven performance culture and decentralised divisional structure combined with a limited level of Group oversight of the finance processes in North America. The following factors in North America also contributed:
  • weaknesses in the composition of the finance team; and
  • insufficient systems, controls and review procedures for supplier income across commercial and finance functions.

 It announced the following “remediation actions”:

• The Group appointed a new CEO for the North America division in June 2025 and is currently in the process of reviewing the North America leadership team. The Group has also taken steps to strengthen its Group Finance and Audit and Risk teams. In addition, it is developing a robust remediation plan which will be monitored and governed by the Board and appropriately assured. This includes but is not limited to:
  • North America division adoption of the global supplier income policy, new governance and controls frameworks and refreshed mandatory training;
  • Group-wide implementation of a new supplier income management system accelerated to early 2026;
  • Finance Transformation programme approved by the Board to enhance systems, processes, controls and centralise Group Finance oversight;
  • The Group’s intention to engage a third party assurance provider to support internal audit to review and validate the Group’s key financial controls and processes;
  • Strengthening the Board including additional North America retail expertise; and
  • A commitment to fostering a culture of integrity, transparency, and accountability; and empowering teams to speak up and embed responsibility at every level.
• As a result of the review conducted to date, the Group expects to incur fees of up to £10m within non-underlying costs in FY25. The Group will provide a further update on future remediation costs in its Preliminary Results.

At the same time, the company announced that its group CEO was stepping down, and according to the Financial Times, the UK accounting regulator, the Financial Reporting Council, is “weighing whether to formally investigate PwC’s auditing” (which, on the face of it, wouldn’t seem to be an unreasonable exercise of regulatory discretion). It’s an impressive list of remediation actions and accompanying cost commitment, notwithstanding that one could likely have predicted much of what’s in there before the exercise ever got under way. One thing that’s missing, put very simply, is an acknowledgement of how WH Smith had previously reported of this area that “The level of complexity and judgement is low in relation to establishing the accounting entries and estimates, and the timing of recognition.” As I put it last time, “On its face, that might either be an insight into a fatal degree of complacency in this area (for example, in not having tuned into various sources of complication) or a sign that what we’re looking at here is indeed a bone-headed error, in allowing a prominent and material error to result from an area of “low” complexity and judgment.” The reference to “weaknesses in the composition of the finance team” was inevitable (they could hardly claim otherwise), but still seems to leave key elements of the story untold. But maybe that’s morbid curiosity talking, and the “we screwed up and we’ll do our best not to have it happen again” message is all that’s materially necessary…

The opinions expressed are solely those of the author.