PwC and the Foreign Subsidiary Blind Spot
A marked lack of professional scepticism by the auditors allowed serious issues in the overseas operations of Corporate Travel Management and WHSmith to persist undetected
Key Takeaways:
The auditors do not appear to have rigorously tested billing controls after the initial overcharging was discovered, allowing similar problems to persist into a subsequent £1.6 billion asylum-seeker housing contract
The overcharging hole grew to £128 million — and it was discovered by the company’s own accountants, not the auditors
Identical blind spot at WHSmith: Material revenue overstatements in the North American business went undetected by PwC for years until a finance-team whistleblower forced action. Investigation launched by UK regulator
Big Four value proposition under fire: When material distortions in foreign subsidiaries evade detection for years, the “global network and cross-border expertise” pitch starts to look unreliable
PwC Australia must have been quietly relieved when the Australian arm of KPMG became engulfed in a whistleblower storm last month. Headlines about its rival’s misuse of confidential client information from Lendlease, Westpac, Dexus and Singtel Optus — and the ensuing Senate inquiry — dominated the news.
This came just as allegations surfaced that a PwC employee had accused the firm’s auditors of ignoring multiple red flags in the audit of Corporate Travel Management (CTM), an Australian-listed travel group — particularly in relation to questionable documentation tied to a £128 million overcharge to the UK government.
The CTM Overcharge Scandal
In 2020, Corporate Travel Management’s British subsidiary was contracted to arrange emergency repatriation flights and hotel accommodation for British citizens stranded overseas during the Covid pandemic.
The CTM UK team overcharged on these contracts through inflated airfares, hidden mark-ups, and billing for services that were either never delivered or not contractually justified.
Two years later, the discrepancies were discovered by the company’s in-house accounts team. UK clients, in the main government bodies, had been overcharged by at least £54.6 million.
The Australian board, and the company’s auditors, PwC, were made aware that serious overbilling had occurred, but were told that the clients who had been overcharged had agreed not to seek full refunds.
A Significant Failure of Professional Scepticism
This is the part that strains credulity. While it is possible the auditors were presented with documentation that appeared credible at the time — particularly amid the chaos of pandemic-era emergency contracts — it is difficult to accept that the board and PwC genuinely believed a UK government department would simply waive repayment of £54.6 million of taxpayers’ money after being overbilled.
Yet that is what appears to have happened.
PwC auditors accepted a series of letters presented by CTM’s UK team as evidence that the government had agreed to forgo repayment.
The amount involved was equivalent to around A$97 million at 2022 exchange rates. That year CTM reported a profit after tax of just A$3.1 million for the entire group. Had the company properly accounted for the amounts it had overbilled by putting in place a provision to repay them, it would have recorded a substantial loss rather than a small profit.
While management and the board ultimately bear responsibility for financial reporting, the sheer scale of the exposure demanded far greater scrutiny from the auditors. PwC was in duty bound to insist on independent verification of the claims with the relevant UK government departments, rather than relying solely on management assurances.
Inadequate Testing of Internal Controls
In addition, once aware of material overcharging, the auditors should have conducted robust testing of controls around billing, revenue recognition, and contract management — to understand how the failures occurred and whether they could recur. Public information gives little indication this happened.
The failure to properly test these controls — and to press the company to strengthen them — meant the weaknesses were allowed to persist.
This had consequences. In February 2023, while these issues remained unaddressed, CTM UK won a much larger multi-year framework contract worth around £1.6 billion, which included the management of asylum-seeker accommodation.
Overcharging continued. In 2025, internal CTM accountants once again discovered major discrepancies in the UK accounts. This triggered a forensic investigation, which soon uncovered that the letter agreements provided as proof that the UK government did not require a refund were not authentic, and that the amount overcharged had now ballooned to £128 million (approximately A$245 million at 2025 exchange rates).
Michael Healy, the former head of CTM’s UK and European business, was stood down amid findings of misconduct across multiple contracts.
Notably, it was not PwC that identified the discrepancies that triggered the investigation, nor did PwC conduct the forensic investigation.
Whistleblower Allegations and Regulatory Scrutiny (2025–2026)
In August 2025, Corporate Travel Management flagged the overbilling problems and postponed the release of its full-year accounts. It later revealed that it would have to refund customers, including the British government.
Trading in the company’s shares was subsequently suspended on the Australian Securities Exchange (ASX). Its market value collapsed, with analysts marking its equity value at zero. What began as an internal accounting issue had escalated into a full-blown crisis, drawing regulatory scrutiny in both Australia and the United Kingdom.
On April 27, a whistleblower sent an email to the PwC board alleging that the audit team had overlooked several irregularities in CTM’s accounts and billing. In response, the independent chairman of the board, John Green, immediately engaged law firm Webb Henderson to investigate the allegations. That review remains ongoing.
Overstated Revenue at WHSmith
While the issues at Corporate Travel Management have raised serious questions about PwC’s audit work on Australian clients, similar concerns have surfaced in the UK with its audit of WHSmith.
Material revenue recognition errors in the retailer’s North American business — specifically the premature recognition of supplier promotional income and rebates — went undetected across multiple reporting periods from at least fiscal 2023 to 2025. These errors overstated revenues and profits in the North American division by around £30 million, artificially inflating both divisional and group results.
Once again, it was not PwC that uncovered the misstatements. The problems only emerged after a whistleblower from WHSmith’s finance team raised concerns in August 2025.
The subsequent profit warning revealed sharp downward revisions to North American and group profit forecasts. It wiped nearly £600 million from the company’s market value in a single day as shares fell around 42%.
A subsequent independent review conducted by Deloitte identified weak internal controls and a target-driven culture as key factors behind the aggressive accounting treatments used to protect reported results and bonuses.
UK Regulator Launches Investigation
The UK Financial Reporting Council has since launched a formal investigation into PwC’s statutory audit of WHSmith’s consolidated financial statements for the year ended 31 August 2024.
The FRC will examine whether the auditors exercised appropriate professional scepticism and obtained sufficient appropriate audit evidence in relation to these revenue recognition judgements, particularly given the known incentive structure.
A Troubling Pattern
Taken together, the Corporate Travel Management and WHSmith cases reveal concerning patterns.
In both instances, significant accounting distortions in foreign subsidiaries went undetected by PwC for extended periods. In the CTM case, the issues originated in the UK operations of an Australian-listed company. In WHSmith, they sat in the North American business of a UK-headquartered group.
Additionally, in both cases, the firm had been the company’s auditor for several years, which is possibly why they were more prone to accept management assertions at face value.
The problems at CTM and WHSmith were exposed through internal reviews or whistleblowers, rather than through the statutory audit process.
And in both cases, questions have been raised about the level of professional scepticism applied by PwC and the adequacy of its testing of controls in high-risk areas.
Cross-Border Expertise in Question
For a firm that positions its global network and cross-border expertise as a core strength, the repeated failure to detect material issues in overseas subsidiaries raises serious questions about the consistency of its audit quality.
One of the main reasons boards and audit committees award large multinational audits to the Big Four — and accept the premium fees that come with them — is the belief that these firms can provide reliable oversight across multiple jurisdictions. Mid-tier firms are seen as lacking the same depth of international presence and cross-border coordination, leaving clients with less confidence that risks in foreign subsidiaries will be properly identified and addressed.
When significant accounting issues in overseas operations — such as those in CTM’s UK business and WHSmith’s North American division — go undetected for years, it directly undermines this central part of the Big Four’s value proposition.
Clients are effectively paying for the assurance that comes with a global network, yet in these cases the network appears to have failed to deliver consistent professional scepticism and control testing where it was most needed.
This not only damages the reputation of the individual firm involved, but also weakens the broader argument that only the largest firms can be trusted with complex, cross-border audits.