The UK’s financial reporting regulator has opened a new investigation into EY’s audit of energy major Shell, examining whether the accounting firm breached strict independence and partner rotation requirements during the engagement.
The probe relates to Shell’s audit for the previous financial year and marks the third regulatory action against EY during 2025, amid mounting scrutiny of the firm’s audit practices. The inquiry follows Shell’s disclosure earlier this year that audit partner rotation rules applicable in both the UK and the US had not been fully complied with.
In a brief statement, the regulator said the investigation would assess whether mandatory limits on the length of time a senior audit partner can lead an engagement with the same client were breached. No timeline has been indicated, and further details on the scope of the review have not been made public.
EY acknowledged the issue, confirming that partner rotation rules had not been adhered to, and said it would continue to cooperate fully with the regulator throughout the investigation.
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Decade-long audit relationship under scrutiny
Shell’s audit has been carried out by EY for nearly a decade, making it one of the most significant audit mandates within the FTSE 100. According to Shell’s annual disclosures, EY was paid approximately ₹548 crore for audit and related services in 2024.
Partner rotation rules are designed to safeguard auditor independence by preventing excessive familiarity between audit firms and their clients. Regulators have consistently warned that long-standing relationships can weaken professional scepticism and compromise the robustness of financial oversight.
Shell said it disclosed the non-compliance issue in July 2025 and subsequently re-filed its regulatory filings for 2023 and 2024. The company stated that its financial statements remained unchanged and that EY’s audit opinions continued to be unqualified.
Rising regulatory pressure on EY
The Shell audit probe adds to a growing list of investigations facing EY in the UK. The firm is currently subject to six separate regulatory inquiries, several of them linked to high-profile corporate failures and governance concerns.
Earlier this month, the regulator opened a separate investigation into alleged unauthorised audit sign-offs involving unnamed companies. In April 2025, EY was fined around ₹3.4 crore for exceeding the maximum permitted audit tenure while auditing an entity with publicly listed debt.
In total, EY has already paid more than ₹52 crore in fines during 2025, including penalties related to serious breaches of audit standards in its work on the accounts of the collapsed travel group Thomas Cook in 2017 and 2018.
The accumulation of enforcement actions has intensified scrutiny of EY’s internal controls, governance frameworks and audit quality safeguards, particularly in relation to compliance with independence rules.
High-stakes litigation adds further exposure
Beyond regulatory probes, EY is also facing significant civil litigation risks. Its audit of NMC Health, a former FTSE 100 hospital operator that collapsed in 2020, is currently under examination in the London High Court.
Administrators of NMC Health have accused EY of negligence and are seeking damages of approximately ₹21,000 crore on behalf of creditors who suffered losses following the company’s collapse.
The outcome of the case is widely seen as a potential landmark for auditor liability and professional accountability in the UK.
Broader implications for the audit industry
The latest investigation comes at a time when UK regulators are pushing for tighter oversight of audit firms, following a series of corporate collapses that exposed weaknesses in financial reporting and governance.
Partner rotation, independence safeguards and audit quality controls have emerged as central themes in ongoing reform efforts. Regulators have signalled that procedural lapses will attract enforcement action, even in cases where financial statements are not restated.
Industry observers say the cumulative impact of multiple investigations could expose EY to substantial financial penalties and reputational damage if breaches are upheld.
The road ahead
While no sanctions have yet been announced, the investigation sends a clear message that long-standing client relationships will not shield audit firms from regulatory action.
For EY, the Shell probe adds further pressure in a year already marked by regulatory scrutiny, legal exposure and growing expectations to demonstrate measurable improvements in audit quality and compliance.
About the author – Ayesha Aayat is a law student and contributor covering cybercrime, online frauds, and digital safety concerns. Her writing aims to raise awareness about evolving cyber threats and legal responses.
