Regulators Find Flaws in Pro-Crypto Bank Revolut’s Audits

Paigambar Mohan Raj
Source: Bloomberg

According to a report by the Financial Times, UK (United Kingdom) regulators have found flaws with the audits of pro-crypto bank, Revolut. In July, a Financial Reporting Council (FRC) report stated that an unnamed company’s audit suffered from inadequacies. The FRC noted that “the risk of an undetected material misstatement was unacceptably high.” However, people close to the matter told Financial Times (FT) that the unnamed entity is in fact Revolut.

Revolut’s audit was carried out by BDO, which is one of the largest accountancy firms in the world. The regulators also highlighted the flaws in BDO’s testing of crypto-friendly bank’s payment procedures.

A person close to the matter told FT,

“The auditors are being significantly more challenging now, because they’re getting beaten up by their regulators.”

Additionally, the person added that BDO’s strict approach may cause delays in filing accounts for Revolut subsidiaries. Revolut Group Holdings Ltd, the group’s parent company, and Revolut Ltd. are required to file their 2021 accounts by the end of September. Moreover, Revolut NewCo UK’s accounts have been overdue since June 10th. The filings from Revolut Travel Ltd. and Revolut FIC Ltd. are also expected at the end of September. Although filing delays are rarely penalized, directors of the firms, however, could be prosecuted.

Revolut holds the tag of being Europe’s second most valuable fintech company. The firm was valued at $33 billion in an $800mn funding round.

Meanwhile, BDO was paid £650,000, for checking the crypto-friendly bank’s statements. The FRC called out the accountancy firm for its poor audit quality.

The regulators are putting more pressure on auditors to refuse company requests to timely sign off on accounting if management has not provided the appropriate information.

BDO in the sights of pro-crypto companies?

BDO was in the crypto spotlight recently after its Italian wing, BDO Italia entered into a partnership with Tether. The firm will work with the stablecoin issuer for its quarterly attestations. Now, Tether has long faced flack from the crypto community for not having a full and complete audit of its reserves. Many in the crypto world believe the firm does not have the necessary backing.

Tether has promised a full audit of its reserves, but that promise has remained unfulfilled for nearly five years. Tether CTO Paolo Ardoino recently said that an audit is still months away.

With the bad rep from the UK regulators, it remains to be seen how BDO Italia will perform for Tether. Moreover, Tether’s audit will be seen by a much larger crypto community, given the strength and popularity of the USDT coin.