Revolut eyes Big Four auditor as board frustrated by BDO remarks
British fintech firm Revolut is reportedly considering a change in its auditing firm following a warning in its last annual accounts, as audited by BDO.
Revolut faced delays in securing a UK banking license, partly due to concerns raised during the publication of its long-delayed 2021 accounts in March 2023. At that time, BDO LLP, the UK’s fifth largest accounting firm, said it had been unable to fully verify nearly £500 million of revenues, adding that “the risk of an undetected material misstatement was unacceptably high” due to the configuration of Revolut’s internal IT systems.
Per a Standard report, this development led to dissatisfaction among Revolut executives, who were frustrated with the audit qualification and the subsequent media coverage. As a result, they reportedly sought legal advice from Schillings to influence how the Financial Times reported the issue.
While Revolut has been exploring alternatives to BDO, the company is expected to retain their services until the end of the 2023 financial year. Despite the audit report’s remarks, Revolut stated that it confirmed their financial statements as giving a “true and fair view,” but the company has not commented on the potential change in auditors.
The challenger bank responded to the auditors’ concerns, stating that they relate to the allocation of revenues between business streams rather than the company’s balance sheet. However, it appears that the PRA remains unconvinced and is likely to proceed with rejecting the application based on its assessment of Revolut’s financial position.
Revolut has been grappling with longstanding issues related to its reporting procedures, which have marred its reputation. Notably, the UK’s Financial Reporting Council, responsible for overseeing auditors, deemed Revolut’s 2020 audit as “inadequate” and highlighted the unacceptably high risk of undetected material misstatements.
The firm recently completed a share restructure with lead investor SoftBank, and obtaining a clean audit in future reports is seen as a key step in securing the license from the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA).
Considering a switch to a ‘big four’ auditing firm is part of Revolut’s strategy to improve its credentials and strengthen its position in the final assessment by the FCA and the PRA for its banking license.
Revolut also fell victim to organized criminal gangs who exploited a flaw in its US and European payment systems, resulting in the theft of over $20 million. The incident, which stemmed from differences between the app’s US and European subsidiaries, allowed some declined transactions to be erroneously refunded. This allowed the criminals to withdraw the refunded amount from receiving accounts via ATMs for several months last year.
