Place sherry in a small saucepan. Bring to a boil; cook until reduced by half. Set aside.
In a Dutch oven, melt butter. Add mushrooms and shallots; saute until tender. Add parsley and lemon juice. Stir in flour until blended; gradually add broth and reduced sherry.
Bring to a boil. Reduce heat; simmer, uncovered, for 8-10 minutes or until thickened. Stir in cheese until melted. Add the cream, salt and pepper; heat through (do not boil).