UK regulator accuses Revolut of ‘material misstatement’ in audit report

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Europe’s second-largest fintech Revolut is under pressure from its auditors to improve its internal controls after regulators accused the firm of material misstatement in its audit reports, the Financial Times reports.

Revolut, a $33 billion neobank that also offers digital asset trading services, was accused by the Financial Reporting Council (FRC) of having significant flaws in its auditing, including an “unacceptably high risk of material misstatement.”

Citing sources familiar with the matter, FT revealed that Revolut was the unnamed financial services provider whose audit by accounting network BDO was slammed by the FRC a month ago. The regulator said that the BDO audit lacked an adequate approach to revenue recognition “and as a result, the risk of an undetected material misstatement was unacceptably high.”

The auditing mishaps have led to the delay of account filing for Revolut Group Holdings, the parent company, as well as most of its subsidiaries. These include Revolut FIC Ltd, the subsidiary that handles digital assets. They are all due by the end of September, FT reports.

The FRC, which oversees auditors and accountants in the U.K. and Ireland, concluded that Revolut needs to start behaving like a bank and not a tech firm, even as it awaits a banking license which it applied for in January 2021.

In addition to the banking license, the neobank is also awaiting permanent approval from the FCA to offer digital asset services in the U.K. It remains the only bank that’s still on the regulator’s temporary register out of the 12 that applied.

Digital assets are a significant business for Revolut, even without the U.K. license. In 2020, the platform recorded $300 million in digital asset trading, accounting for 10% of its revenue. As CoinGeek reported, the U.K. remains the only jurisdiction in Europe in which the firm is not fully licensed to offer digital asset services after gaining a license in Cyprus that allows it to serve the 30 countries in the European Economic Area.

Revolut’s challenges stretch beyond auditing, however. A new report on September 7 disclosed that the company is engaging in major cost-cutting measures under Project Prism. This includes rescinding job offers to several graduates who were slated to start at the company in the coming weeks.

Some of the grads took to LinkedIn to reveal their experiences, with some being asked to return laptops and other resources the company had issued to them in preparation for their new roles.

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