Private equity (PE) firms — a type of investment company that buys, grows, and sells other companies to earn a profit — have been actively making investments in accounting firms.
To bend the rules without outright breaking them, deals involving PE firms and accounting firms resulted in the so-called alternative practice structure (APS).
In this case, APS happens when the accounting firm transfers the ownership of its non-audit/non-attest services (e.g., tax and consulting services) to the private equity firm.
Such complex business relationships and firm restructurings have been a source of concern, especially when it comes to maintaining auditor independence.
“Private equity structures can be complex and can include entities that have varying levels of influence over other entities — either within their investment portfolio or within the contemplated structure.”
Accounting firms that have received strategic investments have so far used the new capital to:
We have yet to uncover the actual effects of PE firms’ investments in accounting firms. However, one thing must remain constant:
Professional accountants and auditors must always stick to their principles and ethical duty to deliver objective and accurate results at all times.
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