Who audits the peer-to-peer lending platforms?

As far as I could tell, nobody has posted an analysis of who audits the various UK peer-to-peer lending platforms, so for this post, I thought it would be interesting to take a little look.

I focused solely on the platforms included in my P2P lending guide.

The results are in…

Less than a third of UK P2P platforms are audited.

Which accountancy firms audit the P2P platforms?

Of the 11 audited P2P platforms in the UK market, PWC is the big winner, auditing the two biggest P2P lenders, Funding Circle and Zopa.

The next most successful firm is EY, who audit the third largest lender, RateSetter, as well as bridging and development loan platform Kuflink.

In terms of the other ‘Big 4’ audit firms, Deloitte audits Octopus choice, whilst KPMG does not have any P2P audit clients.

BDO, the fifth largest global accountancy firm, audits Fitzrovia Finance.

The other five audited P2P platforms are audited by smaller regional audit firms:

  • Assetz Capital – audited by Kay Johnson Gee LLP
  • Archover – audited by Carter Backer Winter LLP
  • Crowdstacker – audited by The HHC Partnership Ltd
  • Invest and Fund – audited by Crowe UK LLP
  • Easy Money – audited by Warrener Stewart

To see the full data set created in writing this post, click here to download.

Why are few P2P platforms audited?

Well, in the UK, statutory audits are mandatory unless you meet two of the the following three criteria:

  • Annual turnover of no more than £10.2 million
  • Assets worth no more than £5.1 million
  • 50 or fewer employees on average

Many P2P platforms remain too small to require a mandatory audit.

As a statutory audit can be costly (particularly an audit performed by one of the Big 4 auditors), firms which do not have to get an audit often choose not to.

What are the benefits of a statutory audit?

The key benefit is that a statutory audit increases credibility and investor trust in a set of financial statements.

In addition to the fact that an independent auditor gives an opinion on whether the accounts are materially misstated or not, auditors can help P2P businesses to improve their internal controls and compliance via advice given in the audit key findings report.

Does an unqualified audit opinion guarantee that a platform is secure?

No, if an auditor signs an unqualified audit report, the auditor is giving an opinion that the accounts are not materially misstated. Not ‘materially misstated’ does not mean that the auditor is giving an assertion that the accounts are 100.0% correct.

However, in signing an unqualified audit report, an auditor must get comfortable that there are no material errors. Further, the auditor must consider and conclude on whether managements decision to prepare the accounts on a going concern basis is appropriate.

Unfortunately, the auditors can still get it wrong. For example, Lendy Ltd appointed administrators on 24 May 2019. In the latest accounts filed for the year ending 31 December 2017 on 29 August 2018, Lendy’s accountants, Moore Stephens LLP, had nothing to report with regards to the directors use of going concern accounting.

Closing thoughts

P2P platforms have been under increased pressure in recent times to rapidly improve in terms of regulation and compliance. The FCA implemented its new rules applicable to P2P firms in December 2019, and it often feels like rarely a day goes by without some mainstream publication featuring negative coverage of the P2P sector.

What the sector needs, now more than ever, is some way of restoring investor trust in light of recent platform failure. Whilst auditors can get it wrong, my view is that investors would still have far more trust in a platform if it filed audited statutory accounts. Particularly if a Big 4 auditor is willing to stake its reputation to state that 1) the accounts are not materially misstated and 2) it is appropriate to prepare the accounts on a going concern basis.

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