Shell forced to amend two annual reports following EY’s compliance breach

Shell plc announced today the requirement to file amended versions of its annual reports on Form 20-F for the fiscal years 2023 and 2024, following notification received from its auditor Ernst & Young LLP (EY). EY informed the company that it had failed to comply with auditor independence rules set forth by the U.S. Securities and Exchange Commission (SEC) during these two years. Despite these required administrative amendments, Shell specified that its financial statements for the concerned fiscal years remain unchanged. Likewise, EY’s audit opinions retain their original unqualified status.

Non-compliance with rotation timelines

EY notified Shell plc’s Audit and Risk Committee of the Board that its previously issued audit reports for 2023 and 2024 could no longer be considered compliant with US auditor independence rules. This breach stems from a violation of US requirements concerning the mandatory rotation of audit engagement partners. The lead audit partner serving during these fiscal years exceeded the maximum allowable period defined by the SEC, thus rendering him ineligible to continue legally in that capacity. EY therefore immediately appointed a new lead audit partner for these audits.

According to EY, additional reviews conducted by this new partner confirm that the published financial statements do not require any accounting revision. Moreover, the audit firm considers it has fully remediated the identified issue and now believes it can issue objective and impartial judgments. These new audited opinions appear in the amended Form 20-F filings submitted today by Shell to the SEC.

No direct impact in the United Kingdom

Although EY’s notification resulted in regulatory adjustments for Shell in the United States, British rules do not imply a similar requirement. EY nonetheless informed the Audit and Risk Committee that the time limitations established by the UK Financial Reporting Council’s (FRC) Revised Ethical Standard had also been exceeded. Follow-up regarding this matter is now exclusively between EY and the British FRC. Therefore, no new accounting disclosures are required in the United Kingdom, according to Shell.

Finally, Shell clarified that aside from the administrative updates necessary to reflect the issuance date of the consolidated financial statements and related subsequent notes, all previously published financial information remains intact. These administrative changes do not impact the initially reported financial results.