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The new path to wealth creation for CPAs

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2 years ago

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In the dynamic landscape of finance and accounting, the relationship between private equity and CPA firms has transformed unlocking opportunities for wealth creation for partners of CPA firms. This article explores why private equity is attracted to CPA advisory firms and how strategic investment can greatly benefit the firms and their partners.

By way of background, we are private wealth advisors at a fully independent registered investment advisor. Previously, we were partners of a Top 10 public accounting firm and co-led their wholly owned RIA. We’ve completed hundreds of financial plans for partners across tax, assurance, and consulting. 

Our takeaway: The whole industry is ripe for change. 

At the heart of many CPA firms lie the pervasive challenges of talent acquisition, deferred compensation, and slowing organic growth. 

Talent acquisition

It’s no secret that the ability to attract talented young people to the profession is struggling. On July 31, 2024, the National Pipeline Advisory Group, an independent advisory group convened by the AICPA’s Governing Council, released its final report of its recommendations to address the profession’s talent shortage. Their six recommendations were as follows: 

1. Address the cost and time of education;
2. Make the academic experience more engaging;
3. Enhance the employee experience, particularly in the first five years of employment;
4. Prioritize strategies to expand access to the profession for the underrepresented at every stage; 
5. Provide better support to CPA Exam candidates; and lastly, 
6. Tell a better story to young adults thinking about which career to pursue on the impact accounting has on businesses, communities and economies.

It’s clear the intense, demanding nature of “busy season” that can occur several times throughout the year depending on where you sit within the organization, combined with staff turnover and increased pressure from management teams to drive organic growth, are dissuading many from pursuing careers in the field. 

This comes at a time when tax and audit compliance are getting more complex. The once idolized image of becoming a partner at a CPA firm has lost its luster among the younger generation after considering the time it takes to earn partner status following graduation (approximately 10-15 years). Instead, they are considering other career opportunities that utilize the same skill sets.

 
Deferred compensation

The path of partnership is more palatable for people who’ve been in the profession for some time already. They’ve seen how deferred compensation plays out in the end from watching others retire and receive benefits. They know they will work till (or almost till) mandated retirement age to accumulate length of service and other compensation awards that will be deferred till after retirement. 

Private equity formula concept dollar sign on blackboard

Each firm will use a different formula, but generally, it is one that pays a multiple of the partners’ average last few years salary distributed over a fixed number of years. For example, let’s say a partner earns an average salary over their last five years of service of $500,000. This can get a multiple of two, which equals $1,000,000 in deferred compensation paid out over 10 years, so $100,000 per year in retirement. 

In practice, this structure has worked well. Senior partners retired and transitioned their book of business to younger partners. The younger partners then grew that book of business until they retired and so on, with each new class of partners’ success contributing to pay the firm’s deferred compensation liabilities. The cycle continues. 

Fast forward to today, and the profession has evolved.  Deferred compensation liabilities have become larger as more and more partners retire. Demographically, a significant number of firm partners are eligible for retirement now, and one can’t help but wonder how many members retired earlier than planned due to the pandemic. This model begins to falter if you are not regularly ushering in a new generation of rain makers. 

Whether you are investing in new technology or looking to fuel growth through M&A, these initiatives all come at a cost. Decreasing business investment due to capital being allocated to deferred compensation liabilities can lead to a business losing its edge over time.

How do you fix an industry in consolidation? Enter private equity.

 
Growth

Take a recession-proof business with positive cash flow and significant operational hurdles and inject strategic capital, deal-making expertise, and a growth mindset. 

Strategic capital can allow firms to be more aggressive to attract and retain top talent by offering competitive compensation packages and growth opportunities through stock units and earnouts. It can alleviate the burden of deferred compensation on a firm’s balance sheet by addressing short-term liabilities and refinancing long-term debt under more favorable terms. It can facilitate more and perhaps larger M&A to further achieve growth objectives and enhance profitability, countering a profession struggling with organic growth.

Beyond the capital infusion, private equity firms offer a wealth of transaction expertise and strategic insight. These are qualities in business that compound value over time. In our view, sourcing, advising on, and executing M&A will be among the most significant contributors to enterprise value growth over the life of an investment. 

Additionally, with private equity taking on stewardship and holding management accountable for strategic growth initiatives, a renewed sense of purpose within the organization can drive sustainable growth and enhance shareholder returns.

Additionally, we believe we are in the early stages of generative AI’s impact on the accounting profession. As firms gradually adopt LLMs to automate business processes and enhance staff workflows, having a strategic partner with access to leading startups and intellectual capital can significantly aid in integrating emerging technologies across the organization.

So, how does this financially impact its partners? And is this a good thing for partners of CPA firms?

The firm will effectively be restructured, and partners will typically receive a mix of cash and stock consideration at closing. It can be presumed that partner capital loans would be paid off as part of the restructuring. From a financial planning perspective, this is a great benefit because capital loans can significantly hinder the wealth effect for many partners if they are not managed appropriately. 

This mixture of cash and stock consideration can be predicated upon many variables such as age, length of service, industry group, and may vary greatly by organization. The cash consideration is to be paid to a partner at closing along with unvested stock units. These units will be assigned different vesting schedules, but usually align with the private equity fund’s projected monetization timeline. 

This structure creates an alignment of interest between the private equity firm, the CPA firm, its partners and all the employees. As the firm grows, creates value, and operates more efficiently, a monetization event will be targeted — typically within five to seven years — during which the stock units would ideally be worth a multiple of what they are worth at the time of closing. 

Note that the timing of monetization and value of shares will be predicated on a variety of factors, including but not limited to:

1. Performance of the underlying asset; 
2. Macroeconomic conditions; and,
3. Capital market activity. 

Potential buyers at that time could be strategic buyers, such as another accounting or professional service firm, or financial buyers, like other private equity firms. 

Overall, the strategic investment activity in this space over the last three years has been encouraging. We believe this presents a significant opportunity for partners of these CPA firms to participate in their firms’ value creation while actively generating earnings, rather than waiting until retirement to reap those benefits. This new partnership structure allows partners to build personal wealth earlier in their careers, enabling longer periods of compounding growth — a concept we are very passionate about. 

We are excited to see our peers, clients, and industry professionals at the forefront of this transformation.

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Accounting

AI-Driven Automation and Continuous Accounting Frameworks

Published

4 days 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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1 week 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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2 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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