The British accounting regulator, the Financial Reporting Council (FRC), has fined EY £295,000 after the auditing firm breached a fee cap in relation to its client Evraz, a Russian steel company where oligarch Roman Abramovich was the largest shareholder at the time of the violation.

The penalty consists of a fine of slightly over £250,000 and costs amounting to £45,000. The FRC found that EY had breached the ethical standards for the audit of Evraz in 2021. In addition to the financial penalty, EY also received non-financial sanctions, including a reprimand.

The FRC's cap on fees aims to minimize conflicts of interest between audit and other services such as consulting by limiting the amount of non-audit services that firms can offer to so-called Public Interest Entities (PIEs). This cap is set at 70 percent of the average fees paid to the audit firm over the last three consecutive years.

The ethical standard sets clear limits on the value of non-audit services that can be provided by an auditor," said Claudia Mortimore, Deputy Executive Director at the FRC. "Its goal is to maintain high standards of auditor independence and secure public trust in audits. In this case, EY's systems and controls failed to ensure compliance with the ethical standard, leading to the breach of the fee cap.

Evraz, headquartered in Moscow, was registered in the UK at the time of the violation. The company's shares were listed on the London Stock Exchange until March 2022, when they were suspended after Abramovich was sanctioned by the UK government following Russia's full-scale invasion of Ukraine.

The violation of the fee cap occurred when Evraz hired EY in early 2021 to sell off the group’s coal interests, which were mainly held through a Russian company. The cap on the fees EY could receive for their work on this project was $280,000. However, the total fees received by EY UK for their consulting services amounted to $535,000, almost double the permitted limit.

Sure, here is the translation of the given heading to English:

"EY, which has been auditing Evraz's books since 2011, resigned as the company's auditor in November 2022. EY stated that it had 'fully cooperated with the FRC throughout the investigation' and added: 'We are committed to learning from this matter and have since improved our internal guidelines, training, and procedures.'"