EY’s $66 Million Shell Audit Is Gone. So Are Four Partners

QUICK ANSWER What’s happening? Four EY partners left the firm in December 2025 after an internal review into breaches of auditor independence rules on Shell’s audit. Lead audit partner Gary Donald had exceeded the SEC’s five-year rotation limit, remaining on Shell’s 2023 and 2024 accounts. Shell stripped EY of its $66 million-a-year contract and appointed PricewaterhouseCoopers from 2027. The UK’s Financial Reporting Council has opened a formal investigation. EY said no changes to Shell’s financial statements were required, but the compliance failure is one of the worst in the firm’s recent history. The fallout exposes how a procedural failure on one of London’s most valuable audit mandates can unravel careers, client relationships, and institutional credibility in a matter of months.

The rule is straightforward. Under SEC regulations, the lead partner on an audit engagement must rotate off after five consecutive years. Seven years under UK rules. It is one of the oldest safeguards in corporate governance — designed to prevent the kind of familiarity and complacency that erodes the independence auditors are paid to protect.

EY broke it on Shell, London’s third most valuable listed company and one of the most scrutinised energy groups in the world. Gary Donald, who led the Shell audit and simultaneously served as EY’s Global Oil & Gas Assurance Leader, exceeded the permitted rotation period and remained as lead engagement partner for both the 2023 and 2024 financial years. When EY self-reported the breach to Shell’s audit and risk committee in July 2025, it triggered a chain of consequences that is still unfolding.

Four Partners, One December

By December, four partners had left the firm. Donald’s departure had already been reported, but the Financial Times revealed this week that three others exited alongside him: Mark Woodward, an auditor with oil and gas expertise who had been a partner since 2017; Hee Yu Lee, also an oil and gas auditor who had been elevated to EY’s equity partnership only six months earlier in June 2025; and Alistair Denton, a partner since 2010 whose role was in EY’s national office — the function responsible for overseeing the firm’s compliance with independence rules.

The inclusion of Denton is significant. His role was not on the frontline of the Shell engagement but in the compliance infrastructure that should have caught the rotation breach before it happened. His departure suggests the internal review examined not just who overstayed on the engagement, but who was responsible for ensuring the rules were followed in the first place.

EY declined to comment on the circumstances of the departures or the conclusions of its review. It remains unclear whether any of the four were found to have broken rules or internal policies, or whether appeals are ongoing. One person familiar with EY’s independence decision-making told the FT that applying the rules is not always clear-cut. “Sometimes the wrong conclusion can be reached even though everyone thought it was right,” the person said.

The Commercial Damage

The reputational consequences are severe, but the commercial hit is concrete. Shell’s audit contract was worth approximately $66 million a year — one of the largest audit mandates in European corporate life. EY had been Shell’s auditor since 2016, when it replaced PwC after a mandatory tender. Shell had been planning to retain EY for another decade, subject to shareholder approval at its 2026 annual general meeting.

That plan disintegrated. Following the breach disclosure, Shell’s audit committee launched a fresh tender, evaluating both PwC and EY on independence, team composition, audit scoping, and regulatory compliance. PwC won. It will take over as Shell’s auditor from the financial year ending December 2027. EY will continue to audit Shell through 2026, but the relationship is effectively over.

The financial statements themselves were not affected. EY appointed a new lead partner to re-examine the 2023 and 2024 accounts and concluded no changes were required. Shell updated its annual reports to reflect the independence breach but did not restate any earnings. In a statement issued last year, EY said it “deeply regrets” the failure and had “remediated the matter.”

Regulatory Investigation

The UK’s Financial Reporting Council, the country’s top audit regulator, opened a formal investigation in December into EY’s 2024 audit of Shell. The FRC’s enforcement division will assess whether EY’s conduct fell short of the professional and ethical standards required of auditors — a question that goes beyond whether Shell’s numbers were right.

EY has been fined by the FRC before on rotation failures. In April 2025, the firm paid a £500,000 penalty for exceeding the maximum ten-year engagement period on audits of another client, Stirling Water Seafield Finance, without conducting the required public tender. The Shell case is of a different magnitude — both in the size of the client and the level of regulatory and investor scrutiny it attracts.

What It Means for the Big Four

The Shell episode arrives at a moment when audit quality and auditor independence are already under intense political pressure across Europe. UK regulators have been pushing for years to break up the Big Four’s dominance of FTSE 100 audit mandates, arguing that concentration reduces competition and accountability. The EU’s own regulatory framework has similarly tightened rotation and independence requirements.

For EY specifically, the timing compounds an already difficult period. The firm’s abandoned plan to split its audit and consulting businesses — known as Project Everest — left internal divisions unresolved. Losing a mandate as prestigious as Shell, on a compliance failure that should have been preventable, raises uncomfortable questions about whether the firm’s governance and oversight functions are keeping pace with the complexity of its client base.

For audit committees everywhere, the lesson is simpler. Independence rules exist because proximity breeds risk. When the systems designed to enforce those rules fail — even on a client as prominent as Shell — the consequences arrive fast and leave lasting marks.

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