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PE alternative Franklin Alliance acquires first accounting firm

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Franklin Alliance is offering small and midsized firms the opportunity to scale without turning to private equity dollars.

Franklin Alliance partners with accounting firms with less than $10 million in revenue, providing resources to address issues like succession planning, recruiting and technology adoption. It announced Tuesday the acquisition of Bement & Company., a family-owned CPA firm based in the Salt Lake City area, and said it has several other firms under contract.

Firms of all sizes are wrestling with the ongoing talent shortage, rapidly developing technology and a generation of retirement-ready partners in need of succession planning. As private equity comes into play as a solution to these issues, smaller firms are often overlooked.

“Small to midsized business owners, investors and individuals are often underserved, caught between tax preparation shops that provide little strategic value and large corporate CPA firms that lack personal attention,” Brent Bement, owner of Bement & Company and cofounder of Franklin Alliance, said in a statement. “While exploring potential CPA platform partnerships, I found many did not share my vision: to add real value to clients and employees while having sustainable growth without sacrificing the personal touch. That vision is what drew me to Franklin Alliance and why I’m proud to be a co-founder, strategic advisory board member and investor alongside exceptional partners.” 

But Franklin Alliance is not private equity. Its cofounder Steve Shein explained that, as an operating company, the typical pressures of a private equity relationship are removed. There is more flexibility, longer timelines and more opportunities for liquidity by way of being funded by venture capital. 

“Venture capital and private equity are similar, but they have a lot of differences,” Shein told Accounting Today. “I think one of those is more focused on growth. The other one is more focused on cost optimization. But we are focused on growth.”

Even as a VC-backed company, Franklin Alliance doesn’t necessarily need more funding unlike many other startups. Shein explained: “We are in a different situation because these businesses that we partner with are all profitable. We don’t burn cash. We raise capital from investors to partner and acquire pieces of all these firms. So we’re creating an engine that is cash flow positive, and we can reinvest that capital in more firms.”

Franklin Alliance
Brent Bement, Tuyee Yeboah, Ben Holloway and Steve Shein, cofounders of Franklin Alliance

Franklin Alliance

Franklin Alliance maintains a “small business ethos,” helping scale and offering operational support while preserving the local firm’s identity and culture. 

“The Franklin Alliance model is uniquely positioned to add value to firms in this segment,” Allan Koltin, CEO of Koltin Consulting Group, said in a statement. “Franklin’s structure as a VC-backed operating company allows it to avoid the constructs and potential constraints of traditional private equity funds. I view Franklin’s model as especially beneficial for accounting firms in the smaller segment of the market, where firm cultures are normally less institutionalized.”

How it works

The Franklin Alliance acquires a controlling stake in the firm. (Shein believes it’s important for partners to maintain equity to keep skin in the game.) The company then deploys its resources, such as an advisory board of accounting experts, to help the firm achieve its unique operational goals, whether it be recruiting new talent, adding capital or adopting technology.

“I find this unique platform approach, specifically targeting smaller firms often overlooked by larger firms and private equity in their roll-up strategies, to be particularly intriguing,” Rick Dreher, former head of Wipfli and a strategic advisor to Franklin Alliance, said in a statement.

Franklin Alliance has a broad geographic focus encompassing the Midwest, Mountain Region and South, but Shein said they it’s not limited to these regions. He also said Franklin Alliance does not aim to consolidate firms: “We are intentional about not viewing these firms as add-ons that should be combined into one, larger firm.”

“As someone who was building a thesis on the technology side, I did start to really build conviction that these technologies will make accountants’ lives easier,” Shein said. “And what’s the ultimate way to invest behind that trend? Well, you can invest in the technology providers themselves, which is what a venture capitalist would do, or you can build a platform to buy into these small firms that will ultimately be the beneficiaries of this technology and the way it evolves.”

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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