Shell Appoints PwC as New Auditor, Replacing EY in 2027

Shell Finalizes Auditor Change to PwC Amid Regulatory Scrutiny

Energy major Shell has announced the selection of PricewaterhouseCoopers, PwC, as its new auditor effective from the year 2027. The appointment concludes a formal tender process and will see PwC replace the incumbent auditor, Ernst & Young, EY.

Background of the Auditor Transition

The decision follows an investigation launched in December by the UK's Financial Reporting Council, FRC, into EY's audit of Shell's 2024 financial statements. The inquiry centers on potential violations of regulations governing audit partner rotation.

Shell had previously disclosed in a July regulatory filing a breach of rules that mandate lead audit partners be rotated every five to seven years. The company confirmed that EY had not complied with U.S. Securities and Exchange Commission, SEC, rules on partner rotation, necessitating amendments to its 2023 and 2024 annual reports. However, Shell clarified that its core financial statements would remain unchanged despite these amendments.

Impact on the Market and Corporate Governance

This auditor change highlights the increasing regulatory focus on audit independence and quality within major corporations. For Shell, the move is a proactive step to ensure compliance and maintain stakeholder confidence. While the company's financials are not impacted, the transition underscores the critical importance of governance protocols. The selection of PwC marks a significant mandate for the firm, while the departure represents a notable client loss for EY amid regulatory challenges.

Summary and Outlook

Shell's transition to PwC as its auditor is a direct response to compliance issues identified with EY. The market will monitor the smooth transition of audit responsibilities and any further outcomes from the FRC's ongoing investigation. This event serves as a reminder of the stringent compliance environment for global listed companies.

FAQ

Q: Why is Shell changing its auditor from EY to PwC?
A: The change follows an investigation by the UK's Financial Reporting Council into EY's audit, specifically concerning potential breaches of auditor rotation rules.

Q: When will PwC officially become Shell's auditor?
A: PwC is scheduled to take over as Shell's statutory auditor starting from the financial year 2027.

Q: Does this auditor change affect Shell's reported financial results?
A: No, Shell has stated that while some annual report filings required amendment, its fundamental financial statements remain unchanged.

Source: Investing.com