That future was not hypothetical.
The accounting profession is evolving rapidly—driven by new technologies, rising client expectations, talent challenges, and shifting capital needs—and alternative practice structures (APS), including private equity and other forms of outside investment, have become increasingly common. While these models reflect how CPAs are adapting to a changing landscape, regulatory frameworks and statutory definitions governing public accountancy have not kept pace. The disconnect has raised important questions among boards of accountancy regarding independence, audit quality, disclosure, and oversight, particularly as firms operate across state lines.
When regulators across the country increased their examination of outside investment in accounting firms, concerns soon emerged that well-intentioned scrutiny could lead to fragmented, inconsistent rules that vary from state to state. Rules that assumed, without evidence, that ownership by private equity or other investors created additional risk. Rules that duplicated existing oversight and imposed different standards based solely on where a firm operates.
The PICPA stepped forward to make sure that did not happen. We helped guide the conversation, bringing forward data, professional expertise, and a clear understanding of how CPA firms function today. This helped refocus attention on balanced, consistent oversight that safeguards the public interest without preventing firms from growing. The PICPA has maintained a clear, principled stance: we support regulations that protect the public, but we oppose changes that create unnecessary burdens or inconsistent rules for firms of any size.
In line with this approach, the PICPA submitted detailed comments to an exposure draft from the National Association of State Boards of Accountancy (NASBA) that addresses APS and private equity. This effort reflects PICPA’s longstanding role as an advocate for both the profession and the public it serves.
A central question raised in the ongoing discussion about APS is whether these evolving firm structures threaten audit quality or CPA independence. What is not often stated is that unique practice structures have existed for decades, and existing professional standards already address the potential risks.
CPA firms are governed by the AICPA Code of Professional Conduct and quality management standards. They also are subject to a robust peer review program that evaluates whether firms create and maintain systems that support ethical behavior and compliance. These safeguards apply to all firms regardless of size or ownership structure.
Importantly, the PICPA noted that no objective evidence suggests that firms that operate under APS models produce lower quality audits. Innovation and investor involvement do not inherently compromise audit quality or the public interest. Regulatory responses should be grounded in evidence, not assumption.
As the APS conversation has evolved, the profession also has taken proactive steps to enhance oversight where appropriate. A key example is the AICPA’s Proposed Peer Review Standards Update No. 3 (PRSU No. 3), which addresses how peer review is administered for firms with more complex structures, including those involving outside investment such as private equity.
Rather than creating new state-by-state regulatory requirements, PRSU No. 3 moves toward greater national consistency by shifting certain firms into oversight by the AICPA’s National Peer Review Program. This approach helps ensure that complex firm structures are reviewed consistently and with the appropriate expertise, without adding layers of conflicting state regulation.
The PICPA was active in this process, as well, through my service on the AICPA Peer Review Board. I represented the PICPA and, together with other state societies, advocated for adjustments to the proposed changes. As a result, the AICPA Peer Review Board made important clarifications in the final standard, including:
The final standard provides greater clarity and avoids uncertainty in how it will be applied. These changes ultimately resulted in support of the final standard.
The PICPA agrees that clients deserve clarity about who is providing services and how attest and nonattest entities relate to one another. However, these disclosure requirements already exist within the AICPA Professional Standards. Adding new, prescriptive definitions or marketing rules at the state level would increase the risk of noncompliance without meaningfully improving public understanding.
One of PICPA’s strongest concerns remains the risk of state-by-state regulatory divergence. CPA firms increasingly operate across jurisdictions, serving clients nationally. Inconsistent rules on independence, disclosure, or oversight would create confusion, increase compliance costs, and hinder the ability of firms to serve clients effectively.
The PICPA believes it is vitally important to maintain the credibility of the Uniform Accountancy Act process. Fragmentation at the state level could undermine national consistency and weaken public protection rather than strengthen it.
At its core, PICPA’s advocacy reflects a commitment to balance: supporting innovation and firm sustainability while upholding independence, ethics, practice quality, and public interest. By engaging directly with NASBA, the AICPA, and other standards-setters, the PICPA ensures that Pennsylvania CPAs have a voice in shaping the future of the profession.
As APS models continue to evolve, one principle remains clear: strong standards, consistent oversight, and evidence-based policy are the keys to sustaining public trust in the CPA profession.
Allison M. Henry, CPA, is PICPA’s vice president of professional and technical standards. She can be reached at ahenry@picpa.org.
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