EY Under Fire Again After Audit Rules Misstep at Shell

Imagine telling your client their financials are fine only to come back later and say, “Actually, don’t rely on what we said.” That’s exactly what happened when EY admitted it had violated US and UK audit rotation rules during its work for Shell in 2023 and 2024. Yep, the same EY that earned a cool $66 million from Shell just last year had to walk back in its audit opinions, not because the numbers were wrong, but because the person signing off on them shouldn’t have been doing so in the first place. So, what exactly went wrong here? Let's chop it up.

Didn’t EY Just Get Fined for This?

This isn’t EY’s first rodeo with partner rotation mishaps. Just a few months ago, the FRC fined EY £325,000 for auditing Stirling Water Seafield Finance for over a decade without retendering the contract, breaking similar rules about audit firm rotation. And just to keep it interesting, KPMG got dinged by the FRC this past June for the exact same type of slip-up. So, what's going on here? Are rotation rules confusing, or are Big Four firms struggling to keep track of their own people? 

Under SEC rules, a lead audit partner must rotate off a public company engagement after five consecutive years and similar rotation limits apply under the UK’s Financial Reporting Council (FRC). These rules exist to prevent overly familiar relationships between auditor and client because when the same faces stick around too long, objectivity can quietly fade into the background.

Why Audit Independence Still Needs a Watchdog

Shell’s financials are unchanged, and EY’s updated opinions remain unqualified so technically, the numbers are fine. But Shell still has to amend two years of SEC filings. That means more paperwork, legal reviews, investor questions, and a fair bit of discomfort for Shell’s audit committee. EY has been Shell’s auditor for nearly a decade, and while a reappointment was expected for another ten years, that now hinges on next year’s shareholder vote. This issue won’t be easy to ignore. 

What’s more troubling is how often these slip-ups are happening within the Big Four. With sprawling global teams and layered management, partner rotation deadlines can easily get overlooked. Senior partners managing multiple high-stakes clients often assume someone else is keeping tabs but that doesn’t cut it with regulators. To avoid this, firms need systems that flag approaching deadlines, log tenure, and alert engagement leads early. Even simple calendar tracking or compliance checklists could prevent costly errors. If your revenue depends on independence, your controls should be built to protect it.

Bottom line: Independence isn’t just about conflict of interest. It’s about documentation, timelines, and knowing when to rotate key people even if no one asks. In large firms like EY, where global coordination is tricky, systems need to bridge the gaps between teams. Otherwise, a missed deadline today could cost you a client or your license tomorrow.

Big Four, Big Oops

EY’s not alone in this mess. KPMG got tagged by the FRC for its rotation-rule breach. PwC and Deloitte have also faced heat in the past for independence issues, including relationships with audit clients and failure to properly rotate staff. The problem seems to lie in what you might call the Big Four “business within a business” structure. With multiple partners managing multiple service lines across continents, it’s easy to miss that someone’s clock has run out. But that’s no excuse in the eyes of regulators.

Final Thought

Audit rules aren’t there to trip you up; they’re there to keep the profession clean and the capital markets humming. Whether you're a solo CPA, a mid-size firm, or part of a global behemoth like EY, the takeaway is clear: track your engagement roles like your license depends on it. Because, well, it does. Oh, and maybe don’t let a $66 million relationship blind you to a 5-year rule. That’s the kind of mistake that leaves regulators knocking and clients wondering, “Do we want to renew that contract?” One newsletter. All the updates you need. Subscribe to MYCPE ONE Insights.