Pennsylvania CPA Journal
Some have wondered if the days of the small practice is numbered. This feature affirms that smaller and solo practices can do more than survive, they can thrive thanks to the benefits offered by AI.
Is this how the bald eagle felt? It was not that long ago it was on the endangered species list, with many believing that it was only a matter of time before it was fully extinct. If you’re a small firm or sole practitioner, you know the feeling. But like the bald eagle, I believe that you will not only survive but thrive in the accounting marketplace of the future.
Advances in technology have always been celebrated for both reducing task time and producing greater accuracy, and, as a result, better managerial decision-making. From the earliest abacus and adding machines to block chain and artificial intelligence (AI), the goals are the same. And as technology is scaled, it is not necessarily too big and too costly for smaller businesses to acquire and apply it to their benefit.
In December 2025 in a PICPA CPA Now blog post, Malachi Hopoate of Canopy discussed technological impacts AI is making among small firms.1 He points out that “lean teams can harness AI to automate routine tasks, streamline client communication, and improve reporting accuracy.” From these applications alone, firms are transforming how they deliver value to clients.
The Carrot Remains the Same
The lure of technology, no matter the era, is consistent: tremendous time-saving efficiencies will complete tasks which took weeks in a matter of days, which took days in a matter of hours, and which took hours in a matter of minutes. For nonchargeable tasks, this reduces the mundane and allows more time for strategic work: reviewing, advising, and leading! This increases productivity and provides greater professional development, from the greenest junior to the senior-most partner. If the tasks are billable deliverables, now small firms can grow their top line revenues and, more importantly, increase bottom-line profits.
There is also another interesting result in the time savings: it could be applied to reduce the professional workweek. While some of us older practitioners cannot imagine busy season weeks with 10 fewer hours than in the “olden days,” we are well-aware that younger and newer professionals cannot imagine working more than 35 or 40 hours a week when choosing a major or accepting a job.
Hopoate concludes with a bottom line for small accounting firms: “They can now compete at scale, deliver faster service, and operate with greater precision – all without sacrificing the personal touch.” That, right there, is the allure of the small firm – a personal-touch relationship that can be maintained, sustained, and leveraged even while growing the firm! So the promise goes, even during a period of complex issues that include practice continuation and the pressure to sell or bring in private equity (PE), technology – like it did with the abacus, calculator, desktop computer, and accounting software – can provide a foundation to stay small while still having a valuable practice asset when transition time eventually rolls around.
Small Firms and AI
If the proposals are correct, small practitioners should be leaning on AI to help answer and resolve questions. So I did. I asked AI (with additional dig-deeper requests) to describe the ways that CPAs should be using AI. The majority of results were truly attractive for small accounting firms.
Automation of routine tasks – Many smaller firms focus on basic accounting and bookkeeping services, essentially providing the small business client with an outsourced accounting department. All of us who have worked with Intuit’s QuickBooks and QuickBooks Online know that even while feeds and imported data expediently move financial data, the integrity and reliability error rates necessitate labor-intensive oversight.
Possibly exposing their fear that their customers are getting AI solutions elsewhere, companies such as Intuit, Xero, Sage, and Zoho Books, to name a few, have introduced AI learning applications to meet the demand for greater reliability and efficacy. The small firm practitioners who master these tools elevate themselves to a source of financial and advisory support that much larger business entities have. With AI applications touting 95% autonomous reconciliation completions, self-learning for categorizations, and transparency for controllership oversight and clear audit trails, the effectiveness for the small CPA firm is clear.
Faster financial reporting and analysis – Taking general ledger or trial balance data and assessing, interpreting, and conveying financial results and the key financial indicators of such results in a meaningful way allows the small business owner to make better decisions, quicker. The timelier that this occurs, the more you increase the rate of successful fiscal management. This only bolsters the value of the CPA as the go-to, “most-trusted” financial adviser.
AICPA SSARS No. 27, Applicability of AR-C Section 70 to Financial Statements Prepared as Part of a Consulting Services Engagement, provides the means for the small firm practitioner to extend an accounting services engagement into financial reporting and deeper-dive advisory and financial support – basically to provide CFO level services.2 This is a huge jumping-off point for a new service. Once there are meaningfully determined financial statements, the practitioner, with careful review and knowledge of the impacting industry and key economic drivers, can offer extremely valuable fiscal guidance.
Enhanced accuracy and anomaly detection – When the calendar flipped into the 21st century, the financial world was hit with a double whammy: the Enron fraud and its fall-out and the explosion of big data. There was an expanded need for definitive auditing techniques to identify outlying anomalies and assist in detecting fraud. For small firm practitioners, big data was an unimaginable financial and human capital investment, seemingly destined only for public company assurance engagements. But by 2014, more mobile devices were accessing the internet than desktop computers. Technology not only grew at a staggering pace, it was also not necessarily cost-prohibitive.
Per Extentia Information Technology, “Big Data is characterized by three key features: cloud computing, which provides scalable infrastructure for data storage and processing; artificial intelligence and machine learning, which integrate with big data for advanced analytics; and the Internet of Things, which generates vast amounts of data from billions of connected devices.”3 So, relatively low costs of data capacity means much more information is accessible, searchable, retrievable, and storable. Machine learning algorithms can now analyze 100% of transactions to identify discrepancies, unusual patterns, and potential fraud that might be missed by manual sampling. The result leads to more reliable financial statements and improved risk management. The small firm has the ability to use the technology, and it is only a matter of the types of engagement at which the technology is aimed. For most small firms, that technology will be aimed at better guiding and advising small-business clients in a cost effective and, yes, profitable manner.
Predictive analytics and forecasting – To offer more proactive and valuable strategic guidance to small business clients, CPAs can leverage AI for predictive cash flow modeling, scenario analysis, and identifying trends. We have seen a similar thing in sports: tendencies are identified, probabilities calculated, and the data are captured. Now we have debates over whether managers should use “analytics” or their “gut feel” for their decisions. Small businesses have long deferred to the “gut feels” of their owner-managers because those “gut-feel” decisions were timely and inexpensively accessed. Now, alternative situations based on significant predictive analytics can also be timely and cost-effectively accessed to provide decision-makers with the best opportunities to succeed. It is this capacity that will continue to be the increasingly invaluable sweet spot for small-firm CPA advisers.
Streamlined compliance – AI applications and tools can help monitor transactions against regulatory changes, maintain detailed audit trails, and organize documentation, simplifying compliance processes. When it comes to enhanced audit quality and reliability, the very nature of compliance is that there is a set of rules and/or guidelines from which all work-product is measured. Further, complying tasks are required and there are consequences, oftentimes severe, for failing to comply. Thus (in my relatively humble opinion), compliance will not go away, and the small firm practitioner will be best positioned to be engaged in compliance services.
Just as accounting/general ledger software were eventually allowed to automatically generate financial statements, it still required a professional adviser to apply financial meaning and context via the elected financial reporting framework (basis of accounting). Embedded AI in accounting software (both QuickBooks and Xero have added AI in 2025) cuts through a lot of the processes to get to the assessing and decision-making deliverables, whether that is tax or reporting.
Deeper financial insights – Access to advanced analytics and real-time reporting will help small-business owners better understand their financial health, manage their cash flow, and plan for their future. One of the many lessons learned from the COVID-19 pandemic is that a business needs the ability to assess and reassess its operating model for ever-changing conditions. While a pandemic is extraordinarily unique, weather events and environmental changes occur; societies choose to ban or prohibit certain things (from alcohol to food additives to pesticides to windmills) that can directly or indirectly impact a given business and its consumers.
The CPA practitioner can build out a wide range of analyses and advisory service offerings. With the benefit of the afore-referenced SSARS No. 27, the practitioner can generate financial statements in conjunction with consulting services to feed into the financial analytics and cash flows ratios. With meaningfully-generated financial statements, dashboard-derived calculators, or AI applications that provide financial info – in conjunction with the practitioner’s knowledge of the impacting industry, the entity itself, and the management of the company – the CPA can generate invaluable guidance and recommendations for growth and improvement. Providing these financial insights expediently, or even in real time, will be a game changer for small businesses.
AI Will Augment CPAs
Many tremble with worry that AI will replace accountants everywhere. It is becoming increasingly clear this will not be the case. In the post-Enron world of accounting, CPAs have been rapidly evolving into a principles-based profession (compared to a previous rules-based approach). Professional judgment cannot be replaced or eliminated because the practice of public accounting is both art and science. Where there are rules, those rules are highly contingent on context and various interpretive factors. Disagreement in accounting is often a signal of judgment at work, not professional failure. Problems or deficiencies (whether in peer review, tax controversy, or technical debate) are not matters of uncertainty as much as they are implications of quality controls (professional oversight judgment). In practice, professional judgment is highly structured and deeply contextual, executed by an informed professional assessing information, facts and influences, trends and tendencies, and often couched by professional skepticism.
Clients may presume AI-generated outputs are definitive and thus defer their judgment to software. CPAs cannot, and will not, do this. Accounting firms must be cautioned not to unintentionally blur the line between assistance and authority. Foremost should be the reality that regulators will not accept “AI said so” as a defense. Our profession still operates within a legal and legislated world. In an accounting profession built on professional judgment, misplaced certainty is dangerous, irrespective of whether it was to come from a person or from a computer.
The Strategic CPA
AI serves as an enabler, not a replacement, for the human CPA practitioner. It helps professionals elevate their role from data processors to strategic partners for small businesses.
AI can help reduce errors and fraud risk as its precision in data handling can minimize costly errors and enhance security through continuous monitoring. However, AI output is deeply contingent on the integrity of the input, reinforcing the need and value for professional judgment, not to mention experience and ethical considerations, to interpret complex scenarios and make strategic decisions. AI crunches data and helps interpret those inputs, but small business management will only benefit from the enhanced budgeting, measured allocation and application of resources, the uncovering of new business growth opportunities, and even tax compliance that CPAs provide.
Another potential sweet spot for CPAs will be financial planning and analysis. Accounting and finance teams are expected to go beyond traditional number-crunching and use advanced data analytics to inform strategic decisions and provide actionable business intelligence. This shift is driven by the need to respond quickly to tax law changes, regulatory requirements, and the growing complexity of financial transactions.
Business owners turn to accounting professionals to deliver deep financial analysis and guidance on critical areas (such as revenue recognition, accounts receivable, and accounts payable). Accounting professionals with a deep understanding of technological advancements are in high demand because organizations want talent capable of leveraging new technology for competitive advantages.
Assurance Services
The small firm/practitioner with a proclivity for assurance services has incredible opportunity. As technology rapidly advances and its costs continue to become manageable, AI helps auditors analyze 100% of a dataset in minutes, something that would have taken weeks back when smaller business audits often included significant, even 100%, examination of transactions using traditional sampling methods. AI not only speeds up the audit process, but it can also improve accuracy and strengthen trust in financial statements. For a single-location small business, this can be cost effective. Additionally, third-party users understand (and accept) that AI’s ability to scan massive amounts of financial transactions enables faster, more accurate fraud detection as it can flag abnormal patterns in real time, long before human reviewers might catch them. This is significant. As the cost of fraud continues to escalate, small business owners and their financial institutions seek an assurance-level financial statement engagement (audit or review), or perhaps a special nonfinancial statement attestation engagement. Qualified small-firm CPAs will be ready if they’ve embraced AI. Further, small-business-implemented AI can establish more reliable internal accounting controls for greater compliance and reliance, making assurance engagements more feasible.
As for the burdens of standards overloads (accounting and performance), applications like ChatGPT are being turned loose to dig deeper and deeper into exposure drafts and issued standards by FASB and the AICPA to quickly and concisely clarify the intentions and applications of such pronouncements.
Alternative Practice Structure
The CPA firm landscape recently has been a whirlwind of activity and change, with countless mergers and acquisitions funding deals by private equity. The once top 200 firms have been consolidated into perhaps the top 75 or so! What is being called the alternative practice structure (APS) separates attest (audit/review) services into a traditional CPA-owned entity to meet independence rules, and moves nonattest functions (tax, advisory, consulting) into a separate, non-CPA-owned entity that can accept outside investment, often from private equity (PE). This structure, which can involve strategic partnerships or traditional corporate models, enables firms to grow with external capital while maintaining regulatory compliance by keeping audit functions separate and CPA-led. APS, however, does require careful management of brand, governance, and potential conflicts.
These trends have created much uncertainty regarding the future of some CPA firms. PE comes in with big cash financing (very attractive to partners, especially aging ones), but a PE investment also comes with “shareholders” expecting a very specific return on investment (ROI). Will the ROI meet the investors’ requirements, or will the PE players consider dumping/selling-off their investments in favor of greater financial investment opportunity and ROI possibilities? Will the bifurcation of attest and nonattest services truly ensure independence and that conflicts of interest are averted, or will indirect affiliates break independence and create huge audit deficiencies and failings? Without the financial benefits of nonattest services carved out, will the costs of audits rise for these bifurcated firms at a time when more traditional CPA firms, using AI, can hold the fee line?
Networks and Network Firms
There are midsize and regional firms looking to beef themselves up by casting a wide net to acquire “qualifying” small firms, but small firms do have a great basis for remaining small and independent (so to speak) with the options provided in the AICPA Code of Conduct’s ET 1.220.010, Network and Network Firms. This option has long been available, but the decision to remain a small firm and maintain autonomy seems all the more pressing today than maybe it did in the past. The choice is made a little easier through the ability to create either official or unofficial affiliation relationships with other small firms that facilitate professional collaboration while everyone retains their autonomy. As ET 1.220.010.02 indicates, “Firms and other entities in the association cooperate with the firms and other entities that are members of the association to enhance their capabilities to provide professional services. For example, a firm may become a member of an association in order to refer work to, or receive referrals from, other association members. That characteristic alone would not be sufficient for the association to constitute a network or for the firm to be considered a network firm.”
The days are gone where small CPA firms and practitioners see other firms and practitioners as “competitive enemies.” Peer firms and practitioners should now be seen as resources wherein, as has been occurring in other models such as APS, a separation between attest and nonattest services preserves independence and mitigates conflicts of interest. Further, the age-old problem of small-firm practitioners overextending themselves can be mitigated through networks. With strategically established peer practice relationships – and with each practice embracing technology and AI – small business clients and individuals can gain an extraordinary and complete range of high quality and high value CPA professional services.
Final Thoughts
The small firm is absolutely not going away! Perhaps one day, given the rate of AI advancement, a sole practitioner could, essentially, do it all. Until then, embrace the amazing available resources, both human and technological, to stand tall as a CPA small practitioner, changing the world one client at a time.
1 Malachi Hopoate, “How AI Is Reshaping Practice Management for Small Accounting Firms,” CPA Now (Dec. 29, 2025).
2 James J. Newhard, CPA, “Monumental Move: Financial Statements Outside Accounting and Review Standards,” Pennsylvania CPA Journal (Summer 2025).
3 “The History and Evolution of Big Data,” Extentia.
James J. Newhard, CPA, is a sole practitioner in Paoli, a CPE presenter, serves on numerous PICPA committees, and is a member of the Pennsylvania CPA Journal Editorial Board. He also serves on AICPA’s Tax Practice and Responsibilities Committee and the Joint Trial Board committee. He can be reached at jim@jjncpa.com.