Shell Appoints PwC as New Auditor, Replacing EY

• The UK's Financial Reporting Council opened an investigation in December into EY's failure to comply with rules requiring lead audit partner changes every five to seven years with mandatory cooling-off periods
• Shell disclosed in July that EY also breached U.S. Securities and Exchange Commission partner rotation rules, requiring amendments to the company's 2023 and 2024 annual reports, though financial statements remained unchanged
• The auditor transition to PwC will take effect in 2027, following the completion of Shell's tender process for selecting a new audit firm

Summary: Shell Appoints PwC as New Auditor, Replacing EY

Key Development:

Shell has selected PricewaterhouseCoopers (PwC) as its new external auditor following a competitive tender process. PwC will replace Ernst & Young (EY) beginning in 2027.

Background and Context:

The auditor change comes amid regulatory scrutiny of EY's work with Shell. In December, Britain's Financial Reporting Council launched an investigation into EY's audit of Shell's 2024 financial statements concerning potential violations of audit partner rotation rules.

Regulatory Violations:

Shell disclosed in a July regulatory filing that EY had breached requirements mandating listed companies rotate lead audit partners every five to seven years with appropriate cooling-off periods. Additionally, EY failed to comply with U.S. Securities and Exchange Commission (SEC) rules on partner rotation, prompting Shell to amend its 2023 and 2024 annual reports. However, the company's actual financial statements remained unchanged.

Companies Involved:

• Shell (oil major)
• EY (outgoing auditor)
• PwC (incoming auditor from 2027)

Market Implications:

This auditor transition reflects growing regulatory enforcement of audit independence and rotation requirements, particularly for major public companies. The change may signal heightened scrutiny of audit practices in the energy sector and could prompt other corporations to review their auditor relationships for compliance. The integrity of Shell's financial statements was not questioned, limiting potential financial impact.

Timeline:

• July: Initial disclosure of EY violations
• December: FRC investigation announced
• February 6: PwC appointment announced
• 2027: PwC assumes audit responsibilities

Neither Shell nor EY provided immediate additional comment on the transition.