Revolut’s board frustrated by the fintech company’s response to audit notice

Revolut has frustrated its own board and raised eyebrows in the accountancy industry after presenting 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 a statement from auditor BDO “confirmed that the ‘accounts present a true and fair view’ of the company’s affairs.

Indeed, BDO had warned that revenue “may be materially misstated” and said the due 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”.

This section noted shortcomings in the fintech’s IT controls and said BDO had been unable to ascertain the “completeness and occurrence” of revenue across three business divisions totaling £477m – 75 per cent of the group’s total reported revenue for 2021.

Michael Power, professor of accountancy at the London School of Economics, described Revolut’s statement as “bizarre”. “They fail to mention the ‘except’ 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 its record and withdraw if it refused to do so because the issue went to “integrity ” to the company’s management.

Revolut’s statement also criticized “misreporting” of the audit opinion in the media and said all £636m of revenue had been “independently verified” and was “not in doubt”.

Some board members thought 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 opinion “was written by people who probably didn’t fully understand the nuances of an audit opinion,” one of the people said. It contained “inaccuracies,” said a second.

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

The board, which is chaired by City 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 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 total 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 more than quadrupled to £4.5m for 2021, declined to comment.

Revolut’s statement said that BDO’s report should be understood as “that it was not possible to confirm exactly how much [revenue] was attached to each individual [business] electricity, but does not refer to a lack of verification of income overall’.

However, two people with knowledge of the audit told the FT that BDO’s decision to qualify the accounts was not based on the distribution of income between business streams.

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

It was possible that true revenue 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, some of the people with knowledge of the audit said.

BDO offered no warning about Revolut’s ability to continue as a going concern, saying it had independently confirmed 100 percent of cash held on behalf of clients with third parties and 99.99 percent of the fintech’s own cash and current assets.

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

“The letters present our client’s position in a clear and unambiguous way. This was not misleading, and we acted at all times in line with our professional obligations, it says.

Revolut declined to comment.

Additional reporting by Emma Dunkley