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PE is just the start of the changes coming for accounting firms

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2 years ago

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The entry of private equity into public accounting over the past four years has certainly brought a great deal of change to the profession – but it’s likely only the tip of the iceberg compared to what’s to come, experts suggest.

“I wake up every morning and I pinch myself, either because something new has happened that I didn’t see coming, or it’s something that’s never happened in our profession before,” Allan Koltin, the CEO of Koltin Consulting Group and a pioneer of connecting PE firms and accounting firms, told attendees at the AICPA Executive Roundtable, a gathering of technology executives held in New York City this week.

“You have a lot of crazy stuff going on,” he added. “Transformation is in the air.”

To start, PE/accounting firm partnerships have been taking on different forms, according to Koltin:

  • The mother ship. This was the first model, where a PE firm would buy in to a Top 25 Firm and provide them with capital to go out and tuck in smaller Top 500 firms.
  • Roll-ups. These work by acquiring a number of midsized firms, but not necessarily merging them all into a single firm. Instead, each firm pursues its own strategy. Interestingly, something similar had been tried before the turn of the century, Koltin noted: “In the 1990s, this didn’t work, but it’s working very well now.”
  • The mid-majors. This involves middle-weight PE firms coming in and acquiring accounting firms in the Top 30-Top 100 range.
  • Within those categories there are a wide range of internal differences — majority stakes, minority stakes, PE firms focusing on different forms of support for their accounting firm partners, and so on — but the entry of private equity has also spurred accountants to look at entirely different options to solve their capital needs, Koltin said.

For instance, BDO USA and Grassi have both implemented employee stock ownership plans, opening the door for many firms to consider them (and a smaller firm, Kirsch CPA Group, did the same just this week), and other firms are considering deals with wealth management firms, as when BerganKDV sold itself to Creative Planning.

Allan Koltin (center) at the 2024 AICPA Executive Roundtable

Allan Koltin at the 2024 AICPA Executive Roundtable

Other buyers may also emerge, such as sovereign wealth firms, family offices, and pension funds, either as original acquirers or when PE funds reach the end of their first investment periods and look to sell their stakes.

What’s more, Koltin said that in the next three to four years, he wouldn’t be surprised to see some of the largest accounting firms launching initial public offerings to take themselves public, and still others putting together truly global firms, with a single ownership and management structure across a number of countries, rather than the current networks of firms run by the Big Four and a few others.

All of this would represent a massive amount of change for the profession, but that wouldn’t surprise Koltin: “I have seen more change in the last four years than in the first 40 years of my career,” he said, “and we’re just getting started.”

(See Koltin’s roundup of recent deal structures and partnerships.)

Where is it all headed?
While private equity has actually been trying to get involved in the profession for some time — Koltin detailed attempts as early as 2008 that were only stymied by the onset of the Great Recession — it is still relatively early to judge PE’s full impact on accounting.

“If this were a baseball game, we’re in the second or third inning,” said Matthew Marinaro, a principal at PE firm Red Iron Group, during the same session at the Executive Roundtable. “There’s a lot of room for consolidation.”

There’s also room for many more PE firms to get involved. Marinaro likened it to a “kids’ soccer game, where all the kids run to the ball.”

“PE is kind of like that,” he explained. “One firm will figure it out, and then all the others will rush in for fear of being left out.”

Koltin agreed that there is much more to come on the PE front, but he also warned against firms suffering from fear of missing out.

“Where is all of this going?” he asked. “When PE comes into an industry, they don’t dabble — they take it over. That doesn’t mean you’ll fail if you don’t take on PE — some of the most successful companies are those that remain independent. But the successful ones have figured out their strategies for bringing in capital.”

And not every PE deal will live up to the hype.

“They won’t all be home runs,” Koltin said. “There will be great, there will be good, and there will be busts. If you take a great accounting firm and combine it with a great PE firm that is aligned on their strategy — then a great firm, a great PE firm, and great strategy will produce a great result. But there will be some weak accounting firms that are trying to fix an internal problem, and those might not do so well.”

Only for the 5%

While private equity will undoubtedly have a big impact on the profession, AICPA president and CEO Barry Melancon noted that for most firms, that impact won’t be direct.

“In five years, 95% of our 44,000 firms will still be in the traditional model, because the PE model won’t go down that far,” he told attendees of the roundtable.

That’s not to say he’s opposed exploring other options.

“I’m a big supporter of different models in the profession,” he said. “I’ve always believed that, because then we can see which ones work and which ones don’t, and how we can improve them.”

But he does have some concerns about whether private equity may not understand the profession’s values, its public service mission, and its true value proposition.

“If you look at PE in the medical industry, I don’t think anyone would say that the service is better there,” he said. “That’s a concern for the profession.”

“I think many PE firms underestimated the recurring value of tax, as opposed to accounting,” he added. “If PE is going to be really successful, it’s going to have to understand the value of what this profession does and gets paid for. … Many PE firms are moving away from or not interested in the public company audit space.”

Private equity firms will also need to understand the importance and the value of the trusted advisor position that accountants occupy.

“If you compare CPA firms that are advisory firms with consulting firms that are not affiliated, CPA firms are more profitable than the stand-alone consulting firms,” he explained. “And the reason for that is the reputation that the profession brings with it – and private equity is going to have to figure that out, and understand the extra value that it brings long-term.”

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Accounting

AI-Driven Automation and Continuous Accounting Frameworks

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1 week ago

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August 15, 2026

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The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

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2 weeks ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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Accounting

Modernizing Internal Controls: Machine Learning and Continuous Monitoring in Auditing

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3 weeks ago

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August 5, 2026

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Internal audit departments and corporate risk managers are modernizing internal control frameworks by shifting from periodic sampling techniques to continuous monitoring and machine learning analytics. As operational data volumes increase across enterprise organizations, automated control testing ensures financial integrity, prevents corporate fraud, and streamlines annual audit engagements.

The Limitation of Periodic Audit Sampling
Historically, internal and external auditors evaluated internal controls by reviewing random samples of financial transactions—often analyzing less than five percent of total ledger entries. In complex enterprise environments, periodic sampling methods carry inherent risks of overlooking localized financial misstatements, unauthorized disbursements, or operational control breakdowns.

In 2026, progressive internal audit functions are utilizing automated continuous monitoring platforms that evaluate one hundred percent of financial transactions in real time. Continuous control auditing systems continuously monitor general ledger entries, procurement approvals, and expense reimbursements across all operating subsidiaries.

AI-Powered Fraud Detection and Anomaly Identification
Machine learning models trained on historical corporate financial data excel at identifying subtle transactional anomalies that indicate potential fraud or operational error. Automated systems instantly flag duplicate invoice payments, unapproved vendor creation, unusual journal entry timing, and unauthorized override of authority thresholds.

When an anomaly is detected, the automated auditing platform generates an instant risk alert, allowing internal audit teams to investigate root causes immediately. Early detection prevents minor operational errors from escalating into material weaknesses in financial reporting.

Streamlining External Audit Preparation
Continuous internal control monitoring delivers significant benefits during annual external financial audits. External audit firms can review continuous audit logs and automated control testing documentation, reducing the time required for manual field testing.

This integrated approach lowers overall audit compliance fees, reduces administrative burdens on corporate accounting staff, and provides senior management and audit committees with real-time visibility into the organization’s overall risk profile.

Core Implementation Guidelines
1. Transition to 100% Data Testing: Replace legacy sampling methods with automated continuous audit monitoring systems.
2. Deploy Anomaly Detection Algorithms: Implement machine learning models to identify unauthorized transactions and operational control overrides.
3. Align Internal and External Audit Workflows: Coordinate continuous control testing protocols with external auditors to optimize annual compliance cycles.

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