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WH Smith Boss Ousted in Accounting Scandal
23 Nov
Summary
- Travel retailer's boss resigned following an audit review.
- US unit booked supplier promotional revenues early.
- Watchdog agency may investigate WH Smith's accounting practices.
WH Smith's chief executive has resigned following an internal review by Deloitte that uncovered accounting irregularities within the company's US operations. The review found that promotional revenues from suppliers were recorded prematurely, inflating short-term profits and failing to adhere to the company's established accounting policies.
This 'target-driven performance culture' within the US unit, with limited oversight from London headquarters, has drawn the attention of the Financial Reporting Council, the UK's audit watchdog. The FRC is reportedly monitoring the situation and has not yet decided whether to launch a formal investigation into the matter.
The accounting issues came to light after an analysis revealed WH Smith's increasing reliance on such income to meet aggressive sales targets. The scandal led to a sharp 40% decline in WH Smith's shares when first uncovered, making it the second-worst one-day drop for a large or medium-sized retailer on the stock market recently.
