An independent review into the auditing of Revolution Beauty’s accounts have found the cosmetics company had inflated its sales by nine million pounds in order to meet its annual targets.
The report comes as a result of a probe conducted by Macfarlanes and Forensic Risk Alliance, which was initiated after “serious concerns” regarding the group’s accounts had been raised by its auditor BDO.
As a result, the firm said it would not be able to complete the audit of the brand’s FY22 accounts by the August deadline, provoking the suspension of Revolution Beauty shares.
Following the launch of the investigation, chief executive officer Adam Minto and executive chair Tom Allsworth stepped down from their positions, while Bob Holt was appointed the new CEO.
Both Minto and Allsworth were found to have made a number of personal loans to distributors and an unnamed employee totalling around one million pounds.
Additionally, it was also found that “materially larger than normal orders” had been placed by each of the distributors in question during February 2022, with revenues reaching nine million pounds as a result of the orders.
The investigation stated that these sales were only adopted for the purpose of meeting sales targets for FY22, as not all products were required by the distributors at the time.
Revolution Beauty’s board said it would be making a number of material adjustments and corrective actions to address the issues raised, including the finalisation of its FY22 report, which is expected to see a “material impact” on its adjusted profits that were initially forecasted to be 22 million pounds.
In a release, Holt said: "The investigation has brought to light a number of serious issues with the running of this business under the previous senior management team and makes clear there is more to be done.
"What is in no doubt is that the fundamentals of Revolution Beauty remain strong, and the mass market beauty opportunity is as compelling today as it has ever been. Together with Elizabeth Lake, our CFO, and the board, we are committed to addressing past deficiencies so that we can deliver the true potential of this business."