Flawed Audits and High Risks
The United Kingdom’s Financial Reporting Council (FRC) has raised eyebrows recently, unveiling significant flaws in the audit of the cryptocurrency-friendly payment application Revolut. The FRC identified an “unacceptably high” risk of “material misstatement” in the financial statements released by the accountancy firm BDO.
The Inadequate Audit Approach
According to a report by the Financial Times, the FRC criticized BDO for their inadequate approach to revenue recognition. It appears the auditors may have tried to pull a fast one on their regulatory obligations by inadequately testing Revolut’s payment processes. One might wonder how a fintech giant valued at a whopping $33 billion could be stumbling over such essential groundwork.
Under Pressure from Regulators
Revolut, which found its footing as a key player in the fintech world after an impressive $800 million investment round led by SoftBank and Tiger Global, is said to be feeling the heat from its auditors. Insiders suggest that the auditors are demanding stricter compliance as they face increased scrutiny from the FRC.
The Consequences of Non-Compliance
An unnamed source pointed out that “the auditors are being significantly more challenging now, because they’re getting beaten up by their regulators.” The weight of regulatory standards impacts not just compliance processes, but also the very integrity of Revolut’s operations.
Temporary Registration: A Precarious Position
At present, Revolut stands as the only company in the UK operating under temporary registration from the Financial Conduct Authority (FCA). This status becomes even more precarious when you consider the FCA’s stringent requirements for companies involved in cryptocurrency activities.
High-Profile Exits in the Executive Team
In 2022, Revolut witnessed a shake-up in its leadership, with five top executives, including the head of regulatory compliance and the money laundering reporting officer, resigning. This mass exodus raises alarm bells concerning its internal controls.
Upcoming Account Filings
The clock is ticking for Revolut Group Holdings and its crypto arm, Revolut FIC, which must file their 2021 accounts by the end of September. Will they rise to the occasion or continue to face challenges? Time will tell, but as the financial world watches, the stakes couldn’t be higher for this crypto darling.
