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Spotlight falls on Revolut after regulators flag up flaws in audit

Revolut - founded by Nikolay Storonsky (pictured) - has been exposed as the company whose audit by accounting firm BDO has been criticized as

The spotlight falls on payments group Revolut after regulators uncovered serious flaws in key testing

Revolut is under pressure to improve its internal accounting controls after regulators uncovered serious flaws in their audit of its financial results.

Founded in 2015, the London-based payments group, which has quickly become one of Europe’s most valuable tech companies, has been exposed as the unnamed financial services provider whose audit by auditing firm BDO was criticized by Watchdog as “inadequate”. the Financial Reporting Council (FRC).

In its annual report on the quality of BDO’s work, released in July, the FRC said Revolut’s audit suffered from an inappropriate approach to revenue recognition, meaning the risk of misstatement was “unacceptably high”.

Revolut - founded by Nikolay Storonsky (pictured) - has been exposed as the company whose audit by accounting firm BDO has been criticized as

Revolut – founded by Nikolay Storonsky (pictured) – has been exposed as the company whose audit by accounting firm BDO has been criticized as “inadequate”.

The watchdog also stressed that BDO’s tests of Revolut’s payment processes contained flaws that could have led to a misstatement.

A source told the Financial Times that BDO is now “significantly more challenging” due to its criticism by the FRC towards Revolut, which could lead to delays in filing some of its accounts.

Another source said that Revolut needs to improve “unsexy things like its back office and controls” because it currently has “the culture of a tech company” but needs “a back office like a bank”.

Internal controls include systems and processes to ensure that a company complies with laws and regulations while ensuring that its financial reports are reliable.

Revolut is the second most valuable private financial technology company in Europe and was valued at £29 billion in a funding round led by Japanese conglomerate SoftBank last year.

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The company’s parent company, Revolut Group Holdings Ltd, is due to submit its 2021 annual accounts by the end of this month, while Revolut NewCo UK, a company set up to hold a banking license which the group applied for in January, has been overdue since June is 10

While companies are rarely penalized for not filing their accounts on time, it can lead to company executives being prosecuted and fines, meaning Revolut’s co-founder and boss, Russian-born Nikolay Storonsky, could find himself in hot water.

It could also spell trouble for Revolut chairman Martin Gilbert, the former head of investment manager Standard Life Aberdeen now known as Abrdn, who stepped in in 2019 to steer the company towards a public listing.

Pressure from auditors to improve its processes is another concern for Revolut, which has seen an executive churn in recent months.

BDO, which was awarded £650,000 for auditing Revolut’s 2020 accounts as it reported a £168m loss, is among others in the industry under pressure as regulators urge auditors not to sign off on the company’s accounts, it unless management provides the required information.

Revolut’s woes also follow troubles at another European tech darling, buy-now-pay-later group Klarna, which more than quadrupled its losses in the first six months of this year.

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