How Will AICPA’s Independence Rules Impact the Future of CPA Firms?

Ever heard the phrase, “Follow the money”? That’s exactly what’s happening in accounting. Private equity (PE) money is flooding the profession, firms are cashing in and regulators are racing to keep up. But here’s the real question, can CPAs maintain independence when outside investors are calling the shots? Meanwhile, the future of accounting looks bright undergraduate enrollment in accounting programs spiked 12% in 2024, the highest in years. More talent is entering the profession, but they’re stepping into a field undergoing rapid changes. As PE-backed firms reshape the industry, the AICPA is stepping in with new rules.

Who is Holding the Rope

For 25+ years, the AICPA Code of Professional Conduct has been the watchdog of auditor independence, ensuring only licensed CPA firms provide attest services. The SEC and state laws add extra layers of protection, but PE firms have found creative workarounds. Now, investors are taking bigger stakes in non-attest firms, pouring money into accounting businesses without technically owning the audit side. That’s why the AICPA’s Professional Ethics Executive Committee (PEEC) is stepping in to ensure the system isn’t being gamed.

“The rise of private equity in accounting is a double-edged sword,” says Susan Coffey, CEO of Public Accounting at AICPA. It fuels growth and innovation, but the profession’s integrity must remain rock solid. The PEEC task force, working on this for two years, is now asking for public feedback before finalizing the updates. They’ve proposed two approaches:

• A specific example of private equity involvement.
• A broader approach to apply across different firm structures.

Either way, firms taking PE money will have to walk a fine line.

CPAs Walking a Tightrope

This isn’t just a technical update, it could fundamentally reshape firm operations and client perceptions. Whether you’re a seasoned CPA or fresh out of school, these rules could reshape the way you work.

• If your firm has PE backing, expect tighter compliance standards. You’ll need proof that advisory and audit arms remain separate. Clients might also start asking tougher questions.
• If your firm is CPA-owned, this could be your competitive edge. Independence-conscious clients may favor CPA-owned firms over PE-backed ones.

The integrity of our profession is non-negotiable,” says Mark Peterson, Senior VP at AICPA. “Firms taking private equity must prove they’re not sacrificing independence for investment dollars.”

The AICPA’s Three-Step Plan

To keep firms in check, the PEEC is rolling out a three-step independence test:

• Identify Network Firms: If linked to PE, does the firm qualify as a network firm? If yes, expect stricter independence rules.
• Determine Covered Members: Who in the firm must maintain bulletproof independence?
• Assess Threats:  Any financial ties that create conflicts of interest? If yes, follow the Conceptual Framework for Independence (ET sec.1.210.010).

One “oh shoot” moment for firms? Non-attest businesses will likely be treated as part of the network firm, meaning they must play by the same independence rules. PE investors and their portfolio companies, however, generally wouldn’t unless AICPA says otherwise.

Private Equity Changing the Rules

PE-backed deals are redefining accounting in real-time. Just look at these major moves:

• EisnerAmper’s PE Deal (2021): The firm took the first big leap into private equity, setting a precedent.
• Grant Thornton’s PE-Backed Expansion (2023):  PE helped expand its tech and advisory services, but raised concerns about audit independence.
• RSM Exploring PE Investment (2024):  Even mid-tier firms are now considering PE funding. If RSM is in, this trend isn’t slowing down.

As more firms follow the money, the AICPA wants to ensure the profession keeps its integrity intact.

Your Move CPAs

The accounting industry is shifting, new talent is entering, firms are modernizing, and regulators are playing catch-up. The real question is: Will these new independence rules work? The PEEC wants your input, and the public comment period is open until June 15. Your feedback will shape the final rules, so now is the time to speak up. “CPAs have a chance to help define the future of the profession,” says Coffey. “We need to hear from those who will be affected by these changes.” So, here’s the real question, will you help shape the future of accounting ethics, or just watch from the sidelines? Join the smartest minds in finance and accounting with one click subscribe now and stay in the know.