Revolut’s board frustrated by fintech company’s response to audit warning

Revolut has frustrated its own board and raised eyebrows in the accounting industry after portraying a critical audit report as a clean bill of health.

The fintech company issued a public statement and hired lawyers this month to insist that an opinion by auditors BDO “confirmed that ‘the financial statements give a true and fair view’” of the company’s affairs.

In fact, BDO had warned that revenues “may be materially misstated” and said the overdue 2021 accounts gave a true and fair view “except for the possible effects of the matters described in the ‘basis for qualified opinion’ section of our report”.

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This section noted shortcomings in the fintech’s IT controls and said BDO had been unable to satisfy itself of the “completeness and occurrence” of revenues within three business divisions totalling £477 million (€542 million) – 75 per cent of the group’s total reported revenues for 2021.

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Michael Power, professor of accounting at the London School of Economics, described Revolut’s statement as “bizarre”. “They neglect to mention the ‘except for’ rider to that opinion,” he said.

A senior audit partner at another firm said the company’s statement was “very inflammatory and ... just wrong”. The auditor added that BDO should ask the fintech to correct the record and to resign if it refused to do so because the issue went to the “integrity” of the company’s management.

Revolut’s statement also criticised “misreporting” of the audit opinion in the media and said that all £636 million of its revenues had been “independently verified” and were “not in question”.

Some board members felt the statement was an “overreaction” and showed a lack of understanding of what BDO’s opinion meant, according to two people with knowledge of the matter.

The statement “was written by people who probably didn’t fully understand the nuancing of an audit opinion”, said one of the people. It contained “inaccuracies”, said a second.

The group’s press and legal departments have been instructed not to take similar actions in future “without consultation”, said a senior company insider.

The board, which is chaired by City of London veteran Martin Gilbert and includes former Goldman Sachs banker Michael Sherwood and former Deloitte partner Caroline Britton, has been under pressure to improve Revolut’s culture and governance as it seeks a UK banking licence.

Revolut’s lawyers, Schillings, wrote two letters to the Financial Times (FT) demanding changes to a news report about the audit. The letters made claims similar to those in the public statement, including that “the annual report confirmed that the overall revenue generated by Revolut was correct”.

Revolut published its 2021 accounts five months after they were originally required to be filed and two months after an extension to the deadline expired.

BDO, whose audit fee from Revolut rose more than fourfold to £4.5 million for 2021, declined to comment.

Revolut’s statement said BDO’s report should be understood to mean “that it was not possible to precisely confirm how much [revenue] was attributable to each particular [business] stream but does not refer to lack of verification over revenue overall”.

However, two people with knowledge of the audit told the FT that BDO’s decision to qualify the accounts had not been based on the allocation of revenues between business streams.

“If BDO felt that the only issue was an allocation issue, they would have worded their opinion to make that clear,” said another person close to Revolut with knowledge of the audit.

It was possible that true revenues could be higher than stated because some transactions could be missing, or lower because BDO had to resort to procedures such as checking sample transactions meaning problems could have been missed, said some of the people with knowledge of the audit.

BDO did not raise any warning on Revolut’s ability to continue as a going concern and said it had independently confirmed 100 per cent of cash balances held on behalf of customers with third parties and 99.99 per cent of the fintech’s own cash and short-term assets.

Schillings said there were “a range of views on the meaning of the qualified opinion” but that it “would not ... be correct to characterise the content of our letters as inaccurate”.

“The letters put forward our client’s position in a clear and unambiguous manner. This was not misleading and at all times we acted in line with our professional obligations,” it said.

Revolut declined to comment. – Copyright The Financial Times Limited 2023