Letter to PEEC on Alternative Practices Structures Exposure Draft

April 30, 2026
Professional Ethics Executive Committee
American Institute of Certified Public Accountants
Professional Ethics Division
1345 Avenue of the Americas, 27th Floor
New York, NY 10105

c/o ethics-exposuredraft@aicpa.org

RE: Exposure Draft — Proposed Revisions Related to Alternative Practice Structures

Dear Committee members:

The Virginia Society of CPAs (VSCPA) has reviewed and appreciates the opportunity to respond to the exposure draft issued by the AICPA Professional Ethics Division, Proposed Revisions Related to Alternative Practice Structures. The VSCPA is the leading professional association in Virginia dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. The VSCPA membership consists of nearly 12,000 individual members who actively work in public accounting, private industry, government, and education.

In May 2025, the VSCPA Board of Directors created a Changing Firm Models Task Force to evaluate key trends in alternative practice structures (APS) and the impact of private equity (PE) on the CPA profession. This Task Force explored APS and evolving firm models, developed an understanding of the ethical considerations associated with these structures, and discussed implications for the VSCPA and its members.

The VSCPA Changing Firm Models Task Force has reviewed the Exposure Draft (ED) and offers the following feedback for consideration. Our responses to specific questions included in the Exposure Draft are provided in Appendix A.

Overall Perspective

We believe the ED is directionally appropriate and reflects the reality that APS and PE-backed models are now a meaningful part of the profession. We support efforts to modernize the independence framework in a manner that protects the public interest while recognizing the evolving structure of CPA firms.

At the same time, it is important that the final framework is operational, scalable, and clearly understood by practitioners, regulators, and the public.

Key Observations

Modernization and Framework

The ED appropriately updates guidance that has not meaningfully changed in more than two decades and better reflects current firm structures, including private equity investment. The refined distinctions between control and significant influence, along with updates to the definition of network firm, are constructive and may help avoid overly broad independence conclusions.

We also support the continued reliance on a principles-based framework, which preserves professional judgment as firm structures continue to evolve.

Operability and Practical Application

A central consideration is whether the ED can be applied consistently in practice.

The revised definitions, particularly those related to network firms, upstream entities, and covered members, introduce complexity that may be difficult to operationalize. Application will often require subjective judgment and ongoing monitoring, which may increase compliance burdens and lead to inconsistent interpretation across jurisdictions.

To support consistent application, robust nonauthoritative guidance will be critical. Practical examples and illustrative scenarios should accompany the final standard.

Scope of Independence Restrictions

Certain independence restrictions described in the ED, particularly those related to portfolio companies and upstream investor entities, may have broader practical implications.

While we understand the intent to address risks arising from complex ownership structures, these provisions may limit service opportunities, create challenging client conflicts, and increase complexity in independence evaluations.

Further clarity on how these provisions should be applied, including consideration of materiality and level of influence, would improve consistency without undermining the objective of the standard.

Independence, Public Confidence, and Economic Pressures

Maintaining independence in both fact and appearance remains critical to preserving public trust.

As APS structures become more complex and ownership evolves over time, independence may become more difficult to explain to external stakeholders. If independence requires extensive technical explanation, confidence in the profession may erode even when firms are compliant.

In addition, private equity introduces economic pressures that, while indirect, may influence firm behavior. Investor priorities related to growth, profitability, and exit outcomes can create pressure on firm leadership, partner compensation, client acceptance, and engagement decisions.

These dynamics do not necessarily impair independence but may increase the risk of undue influence and should be considered within the framework.

Scalability and Implementation

As firm structures evolve, it is important that independence requirements remain workable in practice.

Increasing complexity may create challenges for firms, particularly if attest services become more difficult to sustain within broader firm models. Ensuring that the framework is both robust and practical is essential to maintaining the viability and value of the attest function.

We also encourage coordination with other standard-setting bodies, including the Auditing Standards Board and Peer Review Board, to support implementation within firm quality management systems.

Conclusion

The VSCPA appreciates the AICPA’s efforts to address the evolving landscape of alternative practice structures and private equity investment through the ED. We support continued refinement of the independence framework to ensure it remains operational, scalable, and clearly understood, while continuing to protect the public interest.

We appreciate the opportunity to share feedback and are committed to working alongside AICPA and other stakeholders in shaping the future of the accounting profession as PE investment continues to play a more prominent role. Please feel free to contact me or VSCPA Vice President, Advocacy & Pipeline Emily Walker, CAE, at (804) 612-9428 or ewalker@vscpa.com if we can be of further assistance.

Sincerely,

Stephanie R. Peters, CAE
President & CEO
Virginia Society of CPAs

Appendix A: Responses to Specific Questions

The VSCPA offers the following responses to selected questions included in the Exposure Draft.

Do you agree that “investor” is defined appropriately (.04c)? If not, please explain.
Yes. The VSCPA agrees that “investor” is defined appropriately.
Do you agree that the definition of “key stakeholders of the investor” is clear in terms of which individuals are included?
Yes. The VSCPA believes the definition is clear.
Do you agree the three models should be included in the interpretation (.06–.07)? If not, please explain, including whether you believe one or more should be included in nonauthoritative guidance or if there are other models that should be included in nonauthoritative guidance.
Yes. The VSCPA agrees that the inclusion of the three models is helpful in illustrating the application of the guidance.
Do you agree that the definition of “network firm” should be amended to add the requirement that the cooperation characteristic (as described in paragraph 29 of the explanatory material) in the definition of “network” be met before a controlling investor of a network firm is considered a network firm? If not, please explain.
Yes. The VSCPA supports this clarification.
Do you agree that if the controlling investor is a network firm, entities it controls should also be network firms?
Yes. The VSCPA agrees.
Do you agree that in an APS, the nonattest entity should be subject to the same independence requirements as the attest firm, including the requirements under the “Independence Standards for Engagements Performed in Accordance with Statements on Standards for Attestation Engagements” subtopic (ET sec. 1.297) (.14)?
Yes. The VSCPA agrees that, due to the close alignment within an APS, the nonattest entity should be subject to the same independence requirements as the attest firm.
Do you agree that when an investor does not provide professional services and the investor’s activities are limited to investing in the nonattest entity and advising on the budgetary or strategic direction of the attest firm (described in paragraph 32 of the explanatory material), then the investor is generally not a network firm? If not, please explain.
Yes. The VSCPA agrees that when an investor’s activities are limited to investing and advising, the investor should generally not be considered a network firm.
Do you agree with the factors for determining whether cooperation exists for the purpose of enhancing capabilities to provide professional services as described in paragraph 33 of the explanatory material?
Yes. The VSCPA agrees with the proposed factors.
If you agree, state whether you believe these factors should be in authoritative or nonauthoritative guidance.
The VSCPA believes these factors should be included in nonauthoritative guidance.
Do you believe any additional factors should be included for determining whether cooperation exists? If so, please provide the additional factors.
No additional factors are recommended at this time.
Do you agree that the covered member section (.15–.16) should remain in the interpretation?
Yes. The VSCPA agrees that this section should remain.
Do you agree that the chief executive of the nonattest entity (and other individuals in an attest partner’s chain of command in the nonattest entity) should be evaluated under the covered member definition rather than be automatically considered covered members (.16)? If not, please explain.
No. The VSCPA believes these individuals are already part of the network firm structure and subject to applicable independence requirements. Evaluating them separately under the covered member definition would be duplicative and add unnecessary complexity.
Do you agree that when the investor has significant influence or control over the nonattest entity, the attest firm should not provide a financial statement attest service to an investee of the investor if an upstream entity of the nonattest entity is an affiliate of the investee (.18b.)? If not, please explain.
Yes. The VSCPA agrees with this guidance.
Do you agree that when an attest client has a financial interest in the nonattest entity, independence is impaired, regardless of whether the attest client has significant influence over the nonattest entity (.18c.)? If not, please explain.
Yes. The VSCPA agrees.
Do you agree that, in an APS with PE when the PE investor controls the nonattest entity, the attest firm should not provide attest services to another portfolio company in any fund when the PE investor either a) has significant influence over the portfolio company and the investment is material the fund, or b) controls the portfolio company (.18d.)? If not, please explain.
Yes. The VSCPA agrees.
Do you agree that the prohibitions described in paragraph .18b.–d. of the interpretation regarding the provision of attest services to investees and other entities of the investor (that is not a network firm), along with the use of the conceptual framework for independence for circumstances when the prohibitions would not apply (.20), are sufficient to address threats to independence in the circumstances described in the respective paragraphs? If not, please explain.
Yes. The VSCPA believes the combination of targeted prohibitions and application of the conceptual framework is sufficient.
Do you agree with the “Relationships with individuals and entities that generally do not create threats to independence” section (.21–.22)?
Yes. The VSCPA agrees and believes this guidance should remain in the interpretation.
Do you agree that the new paragraph .03 of the revised “Alternative Practice Structures” interpretation of the “Form of Organization and Name Rule” should be in the interpretation? If not, do you believe this is a practice issue as described in paragraph 66 of the explanatory material and, if so, is there another approach that should be considered (for example, in nonauthoritative guidance)?
Yes. The VSCPA agrees.
Do you agree that the proposed guidance is operational? If not, please identify specific sections you do not agree are operational.
Yes. The VSCPA believes the Exposure Draft is generally operational. However, additional nonauthoritative guidance and examples would improve consistency in application.
Are there any other independence threats related to practicing in an APS, as well as in traditional networks, that we haven’t addressed? If so, please explain.
No. The VSCPA does not identify additional independence threats at this time.
For what areas do you believe nonauthoritative guidance is needed (other than those already identified)?
No additional areas were identified beyond those included in the Exposure Draft.