UK Watchdog Probes EY’s Audit of Shell Over Partner Rotation Breach

The UK Financial Reporting Council (FRC) has formally opened an probe into Ernst & Young LLP’s statutory audit of Shell plc’s consolidated fiscal statements for the twelvemonth ended December 31, 2024. The probe focuses connected imaginable breaches of mandatory audit spouse rotation requirements nether the FRC’s Revised Ethical Standard.

The probe follows a July 2, 2025, disclosure by Shell to the London Stock Exchange, successful which the vigor large said EY had identified non-compliance with audit spouse rotation rules, including exceeding the maximum permitted tenure for cardinal audit partners. While Shell confirmed astatine the clip that its fiscal statements remained unchanged, it said it would update its 2023 and 2024 Form 20-F filings to bespeak the issue.

According to the regulator, the determination to unfastened the probe was taken by the FRC’s Conduct Committee astatine a gathering connected October 21, 2025. The lawsuit volition beryllium handled by the FRC’s Enforcement Division nether its Audit Enforcement Procedure.

The FRC emphasized that the probe is constricted strictly to the applicable statutory auditor oregon audit steadfast and does not widen to Shell itself oregon immoderate different parties. It besides stressed that the opening of an probe does not connote immoderate uncovering of wrongdoing oregon breach astatine this stage.

Audit spouse rotation rules are designed to safeguard auditor independency by limiting however agelong elder audit partners tin stay connected the aforesaid engagement. In the UK, these requirements signifier a cardinal pillar of the post-financial-crisis audit betterment agenda, peculiarly for ample nationalist involvement entities specified arsenic FTSE-listed companies and planetary vigor majors.

The probe adds to ongoing regulatory scrutiny of the UK audit market, wherever the FRC has stepped up enforcement enactment successful caller years amid concerns implicit audit prime and governance failures. The regulator has antecedently sanctioned large accounting firms for ethical modular breaches, signaling a tougher stance arsenic it prepares for a broader modulation into the planned Audit, Reporting and Governance Authority (ARGA).

For Shell, 1 of the world’s largest publically listed vigor companies, the substance is regulatory alternatively than fiscal successful nature. The institution has already stated that the identified non-compliance does not impact the accuracy of its reported results. However, the lawsuit underscores the heightened governance and compliance expectations facing lipid and state majors arsenic they equilibrium capitalist scrutiny, vigor modulation pressures, and analyzable planetary reporting obligations.