The American Institute of Certified Public Accountants (AICPA) has issued a discussion memorandum requesting public comments on potential revisions to the AICPA Code of Professional Conduct.
The aim is to change some of the independence rules linked to alternative practice structures (APS), amid the growing trend of private equity investment in accounting firms.
The AICPA’s Professional Ethics Executive Committee (PEEC) established the APS Task Force in 2023, to address the ethical challenges posed by private equity stakes in accounting firms.
The discussion memorandum outlines preliminary conclusions and two interpretation options for public review until 15 June 2025.
These two potential revision options include one with a specific example related to private equity, and another with a broader approach.
Both options suggest a three-step process for determining independence, involving the identification of network firms and covered members within the APS, as well as any additional relationships that could threaten independence.
In the proposed framework, non-attest entities would be considered network firms of the attest firm, while a private equity investor and its associated entities would not.
However; there are scenarios where a portfolio company might be classified as a network firm for reasons that will be detailed in the task force’s memorandum.
Following the comment period, PEEC intends to incorporate the feedback into its research and prepare a formal exposure draft.
This initiative follows AICPA’s engagement with the Internal Revenue Service (IRS) regarding recently proposed headcount reductions.
It is reported that the job cuts will mainly affect newly recruited employees, who were brought on board as a result of the former US administration’s initiative to bolster the IRS service level by providing additional resources and expanding its workforce.
