UK watchdog probes EY's audit of Shell over rule violation

Dec ‌15 (Reuters) - Britain's Financial Reporting Council 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.

In July, Shell said it would update its 2023 and 2024 annual reports due to EY's non-compliance with the U.S. Securities ⁠and Exchange Commission's audit partner rotation rules, while keeping the financial statements unchanged.

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.

Shell did not ‌immediately respond to a Reuters request for comment.

(Reporting by Yamini Kalia and Prerna Bedi in Bengaluru. Editing by Mrigank Dhaniwala and Mark Potter)