Revolution Beauty

When auditors refused to sign off on the accounts for UK-based online retailer Revolution Beauty in 2023, company directors called for an independent investigation into several concerns that arose during the audit of the company’s FY2022 accounts. Revolution engaged Macfarlanes LLP and FRA to investigate the concerns raised by the Auditors that had already resulted in a delay to the publication of Revolution’s audited final results and annual report, and as a result the suspension of its AIM listing.

As reported by the Financial Times, the audit had revealed concerns relating to the acquisition of a related-party supplier, loans to distributors and senior employees, and changes to the company’s accounting policies that had not been flagged to the auditors.

FRA’s investigation

FRA performed a targeted investigation of the highlighted concerns and reported its findings to the newly appointed investigation Committee. The investigation involved a targeted email review, interviews and analysis of accounting records.

The period of review covered the lead up to the company pursuing a successful IPO in July 2021 and the subsequent years of trading as a listed entity on the AIM sub-market of the London Stock Exchange.

Findings and next steps

The investigation identified:  

1. Financial issues that were not considered in the original valuation of the related party supplier prior to its acquisition that indicated the valuation was overstated.  These findings resulted in Revolution commissioning a new independent valuation report and, following its completion, announcing revised terms to the deferred consideration due.  
2. Sales included in the revenue figures published in Revolution’s trading updates which had to be reversed in the FY22 results as they were only undertaken for the purposes of meeting sales targets. Most of the products ‘sold’ were not required by the Distributors at the time.  
3. Undisclosed personal loans made by two members of Revolution’s board to senior managers of the Group and certain of the Group's nonexecutive directors, as well as loans to key distributors.  
   
   The Independent investigation – conducted by Macfarlanes and FRA – provided its findings to the Investigation Committee, thereby facilitating the resumption of the FY2022 audit work, and subsequent publication of audited financial results and lifting of Revolution’s AIM-listing suspension.

Learn more

The Revolution Beauty case is only one illustration of the financial, legal and reputational impact of failing to resolve audit and accounting issues before they are exposed to the market.  

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