UK's FRC investigates EY's Shell audit

UK’s Financial Reporting Council (FRC) said on Monday it had opened an investigation into Ernst & Young’s audit of Shell’s 2024 financial statements over potential breaches of audit partner rotation rules.

Shell said in a July regulatory filing that it breached UK rules on audit partner rotation set by the Financial Reporting Council, which require listed companies to change the lead audit partner every five to seven years and impose cooling-off periods before they can return.

At the time, the company also said it would amend its 2023 and 2024 annual reports after auditor EY failed to comply with U.S. Securities and Exchange Commission rules on partner rotation, though its financial statements would remain unchanged.

SEC REQUIRES AUDIT PARTNER ROTATION AFTER FIVE YEARS

U.S. SEC rules require lead and reviewing audit partners to rotate after five years with a five-year cooling-off period, while other key partners have to rotate after seven years with a two-year break.

“As disclosed on 2 July 2025, EY UK determined that time limitations under the FRC’s Revised Ethical Standard regarding rotation of partners on one engagement had been exceeded and reported this matter to the FRC,” EY said in an emailed statement.

The accounting firm said it would continue to fully co-operate with the FRC throughout the probe.

EY told Shell in July that its U.S. audit opinions for 2023-2024 should not be relied upon and assigned a different partner to reissue them. It also flagged UK partner rotation breaches, though no amended filings were required in the UK.

The FRC’s conduct committee made the decision to open the investigation on October 21, and the probe will be conducted by the regulator’s enforcement division.

In a response to Reuters’ enquiry, Shell referred to its July statement.