Just days after announcing that it is at the “finish line” of winning a UK banking licence, and accounts revealed its first annual profit, Revolut could be in serious trouble.
Could Revolut be the next Wirecard?
Revolut’s auditor warned that the design of the fintech’s IT systems meant there was a risk that the bulk of its 2021 revenues were materially misstated even as it turned a profit for the first time that year.
The crypto boom helped Revolut report a net profit of £26 million in 2021 compared with a £223 million loss the previous year.
Revenues in 2021 almost tripled to £636 million.
But the group’s auditor, BDO, issued a qualified opinion on Revolut’s overdue accounts because it had been unable to fully verify £477 million of revenues — including its foreign exchange and wealth department, which includes crypto.
Auditors said in their report into the accounts that they had been “unable to satisfy ourselves as to the completeness” of these revenues, meaning that references to the company’s revenues “may be materially misstated”.
BDO had been pushing the fintech to improve its internal controls after the UK accounting regulator, the Financial Reporting Council, found there was an “unacceptably high” risk of “material misstatement” in its 2020 accounts.
The FRC findings, revealed by the FT in September, included that BDO’s 2020 audit had an “inadequate” approach to revenue recognition.
BDO said in its report on the accounts that because it had been unable to rely on Revolut’s IT systems and controls throughout 2021, it had resorted to other methods such as verifying cash balances and cash in client accounts.
It was forced to use those procedures because no reliable documentary evidence of the transactions was produced or maintained outside of the IT system.
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