The AICPA’s Professional Ethics Executive Committee (PEEC) will seek public comment on revised ethics guidance for alternative practice structures (APS), including structures involving private equity and other outside investors, the organization said on November 3, 2026.
This follows the PEEC’s approval to issue another round of proposals during a meeting on November 3, according to materials posted ahead of the panel’s meeting.
The proposal would revise the AICPA Code of Professional Conduct’s independence and conflicts of interest guidance for audit and attest firms that are closely aligned with another entity that has one or more investors.
The PEEC in March last year first posted a discussion memorandum on potential revisions to the code of conduct and independence rules regarding APS in response to the growth of private equity (PE) investment in accounting firms. And the committee followed up with an exposure draft late December 2025.
After deliberating over the 81 comments received in response to that ED, the panel decided to revise the exposure draft for further comment. The new ED is expected to be posted later this month. Once posted, it will have a 120-day comment period.
The AICPA said that the revised ED, among other things:
- Refines the definition of “alternative practice structure” to include the involvement of an investor. Complex but more conventional firm structures without an investor are excluded, although these continue to fall under existing independence rules in the code.
- Clarifies the definition of a ‘closely aligned entity’ as one which 1) receives substantial revenue or similar economic benefit from the attest firm, including but not limited to net profits, residual value, or assumption of the entity’s obligations and 2) is integral to the attest firm’s operations by providing resources such as personnel, technology platforms and office space. Vendors, joint ventures and other more ordinary business relationships are excluded from the definition.
- Lists the attest firm, closely aligned entity and the controlling investor of the closely aligned entity as ‘network firms,’ a term within the code that refers to entities subject to independence requirements for financial statement audit and review clients. The previous version did not automatically include a controlling investor as a network firm.
- Broadens the list of those automatically designated as ‘covered members,’ or those subject to independence rules. The CEO of the closely aligned entity, for example, is now included.
- Clarifies that an attest firm cannot provide attest services to other businesses and organizations over which its closely aligned entity’s investor has significant influence. The earlier proposal generally required an assessment involving both the application of affiliate rules within the code and the conceptual framework – a catchall evaluation process for situations not specifically spelled out in guidance – to determine if attest services could be provided.
The AICPA’s ethics provisions on independence have addressed APS for decades, but the PEEC believes that the increased prevalence of private equity investment in the profession necessitates updated ethics interpretations.
“The proposed interpretation is not intended to operate as a standalone independence model or to replace other provisions of the code,” the new exposure draft will say, according to the AICPA. “Rather, it is intended to clarify how existing independence concepts apply when an attest firm operates in close alignment with another entity that has an investor and when investor relationships may create additional threats to independence.”
The revisions are intended to clarify how existing independence concepts apply in alternative practice structures, rather than to establish a standalone independence model.
If adopted next year, the changes will take effect one year after adoption, with early implementation permitted for firms that implement the revisions in their entirety.
Comment letters to original ED
Of the 81 comment letters, 17 supported the proposal while 16 others supported it with suggested changes. Forty-six did not support significant aspects of the ED, and two were neutral.
Some commenters were concerned with the appearance of independence, questioning whether auditor independence can truly be maintained in PE-backed or investor-backed structures. They cited concerns about investor influence over firm strategy and operations, shared resources, personnel, technology, and infrastructure, compensation, and growth pressures.
Views were diverged on how restrictive the rules should be. Some wanted bright-line prohibitions, while others argued that overly broad restrictions would limit firms ability to serve clients, reduce competition, and create compliance burdens.
Commenters focused heavily on who should count as an “investor,” such as whether economic interests beyond equity ownership should be included and whether passive investors should be excluded.
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