Shell Drops EY as Auditor Amid Regulatory Probe | FT
- Shell has appointed PricewaterhouseCoopers (PwC) as its new auditor, replacing Ernst & Young (EY) following a tender process triggered by concerns over EY’s independence and a subsequent investigation...
- The decision to seek a new auditor came after Shell’s audit and risk committee initiated a tender process last autumn, despite EY being in the first year of...
- The Financial Reporting Council (FRC), the UK accounting regulator, launched a formal investigation in December 2025 into EY’s 2024 audit of Shell’s accounts.
Shell Shifts Audit to PwC Amid EY Investigation
Shell has appointed PricewaterhouseCoopers (PwC) as its new auditor, replacing Ernst & Young (EY) following a tender process triggered by concerns over EY’s independence and a subsequent investigation by UK regulators. The change, announced on , will take effect for the financial year ending , subject to shareholder approval.
The decision to seek a new auditor came after Shell’s audit and risk committee initiated a tender process last autumn, despite EY being in the first year of a potential ten-year engagement. This move was prompted by revelations that EY had breached independence rules in both the US and the UK, relating to the length of time a partner could lead the Shell audit. Shell initially flagged these breaches in .
The Financial Reporting Council (FRC), the UK accounting regulator, launched a formal investigation in into EY’s 2024 audit of Shell’s accounts. Adding to the scrutiny, one of EY’s top accountants responsible for the Shell audit since left the partnership just six days before the FRC announced its investigation.
A Rapid Re-Tender
The auditor switch-up is notable given EY’s recent reappointment by Shell in late for a term of up to ten years. Auditing regulations mandate a retendering process after a certain period and Shell initiated this process in . However, the company unexpectedly asked both EY and PwC – the two firms remaining in contention – to resubmit their bids last autumn, according to a source familiar with the matter.
The selection criteria focused on key areas including auditor independence, the composition of the audit team, the scope of the audit, and adherence to regulatory requirements. PwC ultimately prevailed, demonstrating a compelling proposal across these areas.
Financial Implications and Transition
EY will continue to serve as Shell’s external auditor for the financial year ending , also subject to shareholder approval. In , Shell paid EY $66 million for its audit services, highlighting the significant financial relationship between the two firms.
The speed of this audit tender process – completed in approximately five months – contrasts with previous tenders which have often taken over a year. This expedited timeline suggests Shell was keen to resolve the situation quickly given the regulatory scrutiny and concerns surrounding EY’s independence.
The Importance of Auditor Independence
The rotation of auditors is a cornerstone of corporate governance, designed to ensure objectivity and prevent undue familiarity between the auditor and the audited company. The rules are intended to safeguard the integrity of financial reporting and maintain investor confidence.
Shell’s decision to move to PwC underscores the importance companies place on maintaining the highest standards of auditor independence, particularly in the wake of increased regulatory oversight and public scrutiny of the accounting profession. The FRC investigation into EY’s audit practices will likely have broader implications for the Big Four accounting firms and their commitment to upholding independence standards.
EY, in a statement, affirmed its commitment to delivering a high-quality audit for the remainder of its term with Shell. The company did not comment on the reasons for losing the contract, or the ongoing FRC investigation.
Broader Context: Scrutiny of the Big Four
This situation adds to a growing trend of increased scrutiny of the Big Four accounting firms – Deloitte, EY, KPMG, and PwC – regarding their independence and audit quality. Regulators globally are increasingly focused on ensuring that these firms are not compromised by conflicts of interest or overly close relationships with their clients.
The Shell-EY situation serves as a stark reminder of the potential consequences when auditor independence is called into question, and the importance of robust corporate governance practices in maintaining the integrity of financial markets.