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EY violated independent rules for Shell audits in the US and UK, which revealed the Energy major and re-entered the Big 4 company into the regulatory crosshairs.
Shell said Wednesday that the EY partner, who led the audit of financial results for 2023 and 2024, has exceeded the period permitted under strict rotation rules set by US regulators. EY also told Shell that it violated UK rotation rules.
The update comes after being fined in April for a similar violation by the UK Accounting Watchdog. The Financial Reporting Council issued a £325,000 penalty for more than a decade audit of the company’s unpublished Sterling Waterfield Finance due to the contract.
The FRC fined rival KPMG in June for violating the same rules.
Shell said EY notified the Energy Group’s Audit and Risk Committee on Tuesday that it was a foul on rules set by the U.S. Securities and Exchange Commission and that US opinions on the effectiveness of internal controls on financial reports in 2023 and 2024 can no longer be relied on.
EY has since discovered the issue, moved another partner to the role of Shell’s lead audit partner, and concluded that no changes to previously issued financial statements were required, Shell said.
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Shell amends a regulatory application with the U.S. Securities and Exchange Commission for two years. The FRC decides whether to open a formal investigation.
Shell’s financial statements have not been changed.
An EY UK spokesperson said: “EY UK deeply regrets that this happened and that it fixed the issue. Previously there were no changes to the year that corresponded to the financial information created by Shell Plc.
“We are committed to the highest standards of audit quality and will continue to take necessary steps to ensure that these standards are supported.”
Shell did not comment on whether it would retain EY as an auditor. EY has been an auditor for nearly 10 years. Shell previously said he would reappoint it for another decade, but the decision will be voted at next year’s annual meeting.
