What's Happening?
The American Institute of CPAs (AICPA) has proposed revisions to its Code of Professional Conduct, specifically targeting alternative practice structures (APS) that involve private equity investments.
These changes are aimed at updating the independence rule, redefining 'network firm,' and revising the 'form of organization and name rule.' The AICPA's Professional Ethics Executive Committee (PEEC) has been working on these revisions throughout the year, with an Alternative Practice Structures Task Force providing preliminary conclusions. The proposed changes are now open for public comment until April 30, 2026. The revisions seek to address relationships and circumstances that could impair independence and provide guidance on evaluating threats. Key areas of focus include distinguishing between 'significant influence' and 'control' by investors over nonattest entities, and updating the 'Conceptual Framework for Independence' and 'Conceptual Framework for Members in Public Practice.'
Why It's Important?
These proposed changes are significant as they aim to maintain the integrity of the accounting profession while adapting to the evolving landscape of firm structures influenced by private equity. By clarifying independence rules and definitions, the AICPA seeks to ensure that firms operating under alternative practice structures can continue to provide unbiased and reliable services. This is crucial for maintaining public trust in financial reporting and auditing processes. The revisions could impact how firms structure their operations and partnerships, potentially affecting their business strategies and compliance requirements. Stakeholders, including accounting firms and investors, will need to assess how these changes might influence their current practices and future plans.
What's Next?
The AICPA is currently seeking public comments on the proposed revisions, with a deadline set for April 30, 2026. Following the comment period, the AICPA will review the feedback and make any necessary adjustments before finalizing the changes. If approved, the new independence updates would become effective one year after adoption, although firms have the option to implement them earlier. This timeline allows firms to prepare for compliance and adjust their structures accordingly. The outcome of this process will be closely watched by accounting professionals and firms, as it could set new standards for practice structures involving private equity.
