Yes, it is correct spelling, and it indeed is a word where the pronunciation does not follow the spelling. In general forms of the verb leugh /L´eːv/ read are commonly pronounced with /v/ instead of /ɣ/. In this case you just have to learn it. (And indeed sometimes, but rarely, spellings like leubhadh are also used).
I am not sure what caused the change – might be that semantically related words like sgrìobh write and leabhar a book influenced the pronunciation here.
Also in much earlier Classical Gaelic the verbal noun was léigheamh (hence modern Irish léamh) so it’s also possible that that form methathesised into something like *leumhagh in speech and then was analysed as a regular verbal noun from a verb *leumh, thus being written as leughadh and influencing the pronunciation of leugh itself.
But we don’t really know.
There are some other words where similar change of /ɣ/ to /v/ happened (eg. apparently some dialects pronounce saoghal as if *saobhal), but I don’t think many of them, and certainly not so common as forms of leugh.