Revolut eyed by UK regulators for audit flaws

UK’s watchdog revealed deficiencies in how Revolut’s payment processes were tested by the BDO, one of the country’s largest audit companies by revenue, which could have led to compromised results in the audit and, therefore, pose an unrefined picture of the fintech.

Europe-based digital banking platform Revolut has reportedly been under pressure from its auditors to improve internal controls after UK-based regulators found flaws in the bank’s auditing accounts, according to The Paypers. The flaws include a high risk of material misstatement and, according to the Financial Reporting Council (FRC), can risk undetected material misstatement.

FRC: „Last year we reported that the firm needed to take urgent action to address continuing deficiencies in the audit work on revenue in particular in the areas of:
. Long-term contracts, including inadequate challenge of significant judgements and accounting treatments arising on contracts;
. Challenging the revenue process and whether there were alternative methods to record revenue and whether the scope and extent of controls testing relied upon were adequate;
. Challenge of management over adjustments to revenue for agency arrangements, including the completeness risk; and
. Substantive procedures performed not adequately addressing the risks identified in relation to accuracy and occurrence and whether revenue was recorded in the correct accounting period.
This followed key findings raised in relation to the audit of revenue in each of the previous two quality inspection cycles.”

FRC explains: „We have seen no improvement in the overall quality of the audit work inspected over revenue. The lack of improvement is unacceptable and calls into question the firm’s efficacy and timeliness of actions to achieve improvements in this area.”

Also, in the audit report, FRC says: „Deficiencies were identified in the audit testing of the entity’s payments process. There was insufficient evidence to demonstrate the audit team’s and IT specialist’s understanding of this area, as well as inadequate procedures being performed. The audit team’s testing over the end-toend payments process was inadequate, and the risk of an undetected material misstatement remained unacceptably high.
The audit team’s quality control review procedures failed to identify our significant concerns and therefore whether the issues that we raised may have led to any material misstatements.”

More details: FRC | BDO LLP | Audit Quality Inspection and Supervision Report