CBA weighs private-equity risks in alternative practice structures; seeks national engagement

The Committee on Professional Conduct on Sept. 19 discussed alternative practice structures (APS) — arrangements in which a licensed attest CPA firm operates alongside an unlicensed non-attest entity, often with private-equity investment — and asked staff to track national work and develop topics the board should consider for comment.

Assistant Executive Officer Franzella briefed the committee on why APS with private-equity involvement have become more common, citing access to capital for technology and AI, talent acquisition and succession planning. He described a common structure in which an attest firm retains licensure and provides audit and attest services while a separate non-attest entity (often owned in whole or part by private equity) provides tax, advisory and administrative services under a shared-services agreement.

"The organization generally operate[s] under a similar brand name, but are formed under different organizational structures," Franzella said, noting concerns regulators and stakeholders have raised about independence and objectivity, governance and consumer transparency.

Staff told members national groups are actively considering guidance. The AICPA’s Professional Ethics Executive Committee (PEAC) formed an APS task force and issued a March discussion memorandum; an exposure draft is expected later in the year. NASBA has convened a private-equity task force and is preparing a white paper to help state regulators. Franzella serves on the NASBA task force and said staff plan to circulate CBA-developed issues and concerns to national bodies.

Committee members recommended the board focus on several topics: (1) independence and objectivity safeguards so attest judgment is not influenced by private-equity profit motives; (2) clearer governance disclosures to determine which entity controls attest functions; (3) consumer-facing transparency, including website disclosures that clarify which entity is licensed and regulated; and (4) revisiting use-of-title rules so licensed CPAs can display their CPA designation without unintentionally triggering regulatory requirements in other jurisdictions. Several members urged that any AICPA exposure draft not be given an abbreviated comment period so state boards can analyze impacts.

Dominic Bridal asked why some APS-related entities instruct staff not to display CPA credentials; Franzella explained firms often operate across jurisdictions with different use-of-title rules and adopt conservative practices to avoid triggering firm registration or other obligations in more restrictive states.

Jason Fox of the California Society of CPAs said the trend toward PE-backed APS addresses real market pressures — technology costs, talent and new service lines — and encouraged ongoing, collaborative involvement by regulators and practitioners.

The committee did not adopt formal regulations but asked staff to continue evaluating independence, governance, cross-jurisdictional and consumer-transparency issues, to monitor NASBA/AICPA developments and to bring back recommendations and suggested comment topics.