IESBA: Private Equity Investment in Accounting Firms – Key Ethics and Independence considerations

IESBA: Private Equity Investment in Accounting Firms – Key Ethics and Independence considerations

• 11 August 2025
• Sustainability Reporting
• South African Accounting Academy

Summary:
The Staff of the International Ethics Standards Board for Accountants (IESBA) has published the Key ethics and independence considerations for Private Equity Investment in Accounting Firms.
Article:

This Staff Alert highlights key ethical matters that accounting firms should pay particular attention to when considering or accepting investment from Private Equity (PE) organizations. It draws the attention of professional accountants in public practice, particularly accounting firm leadership, to important ethics and independence provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) that remain applicable both before and after PE investment in an accounting firm. 

The Staff Alert highlights various possible ethical and independence implications arising from PE investment in accounting firms. These include:

From an ethics perspective:

• threats to compliance with some of the Code’s fundamental principles, such as confidentiality;
• shifts in a firm’s ethical culture resulting from organizational restructurings, different incentives and evolving growth expectations that may undermine ethical obligations; or
• undue pressure to act unethically in pursuit of new revenue goals.

From an independence perspective:

• concerns arising from a PE organization holding a controlling interest in the firm while also having a financial interest in the firm’s audit clients;
• the inclusion of new entities as network firms and the complexities in identifying them, and potential related independence threats, if the firm becomes part of a larger, evolving post-investment structure; or
• situations where individuals in the PE organization’s management could fall within the Code’s “audit team” concept and the applicable independence framework.

The Staff Alert emphasizes the importance of firms maintaining ongoing monitoring for changes in clients, services, business and network relationships, and other relevant factors with potential ethics and independence implications, both during the pre-investment phase and after completion of the PE transaction, and continuing to act in the public interest.

It also underscores in the context of PE investment that compliance with the Code by firms enhances the quality and consistency of the services they provide and underpins public trust and confidence in their work.

Besides accounting firms, this publication may also be of interest to regulators and audit oversight bodies, jurisdictional standard setters (JSS), private equity entities and other investors, professional accountancy organizations (PAOs), and others with an interest or role in the work of accounting firms.

The development of the Staff Alert has been informed by the IESBA’s ongoing engagement with various stakeholders, including accounting firms, private equity organizations, regulators and oversight bodies, JSS, and PAOs.

Click here to download the 17-page document:

https://ifacweb.blob.core.windows.net/publicfiles/2025-07/IESBA%20Staff%20Alert%20-%20PEI%20-%20Final%20%287.31.25%29_0.pdf 

Relevance to Auditors, Independent Reviewers & Accountants:

• As an accountant, auditor and independent reviewer, you need to be aware of and consider the information contained in publications by various professional bodies and standard-setters, e.g. IESBA, IAASB, etc. – so that you can apply this in the performance of your duties.
• IESSA must be applied by all sustainability assurance practitioners (SAPs), and should also be used by professional accountants (PAs) involved in sustainability reporting.
• Private Equity entities have specific ethics and independence requirements that must be complied with, and SAPs need to consider these when performing an assurance engagement.

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