CPA Firms Expanding Beyond Audit & Tax: What Leaders Should Know

Your CPA Firm Wants More of Your Business. Before You Say Yes, Understand Why.

What CEOs, CFOs and boards should know as CPA firms expand beyond audit and tax into advisory, outsourced accounting, staffing and technology services.

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The relationship between organizations and their CPA firms is changing.

For decades, that relationship was relatively straightforward. CPA firms audited financial statements, prepared tax returns and provided technical accounting advice when needed.

Today, many CPA firms are expanding well beyond those traditional services. Outsourced accounting, fractional CFO and controller services, interim finance leadership, technology consulting, transaction advisory and even accounting and finance staffing are increasingly part of the offering.

At the same time, private equity investment, consolidation, alternative practice structures, offshoring and new delivery models are reshaping the accounting profession.

None of these developments are inherently good or bad.

But they do mean CEOs, CFOs, audit committees and boards need to become more informed buyers of both attest and non-attest services.

The question is not whether you should use a CPA firm for advisory work. Many CPA firms are excellent providers. The question is whether you understand the implications of the relationship and have evaluated the best provider for each need.

Why are CPA firms expanding beyond audit and tax?

CPA firms are expanding their advisory and non-attest services for several reasons.

Clients need help. Accounting and finance talent remains difficult to find. Technology is changing how finance functions operate. Organizations are looking for more comprehensive support from trusted providers.

There are also business considerations.

Audit is labor intensive, highly regulated and carries substantial quality control, documentation and professional liability requirements. Outsourced accounting, CFO advisory, consulting and other non-attest services can create recurring revenue while deepening the firm's relationship with a client.

Private equity investment is another factor influencing the profession. The PCAOB has discussed how private-equity capital can help accounting firms expand service lines, enter new businesses and accelerate acquisitions, while also raising questions related to changing incentives, auditor independence and auditor choice.

For business leaders and boards, the important takeaway is simple: understand the provider's business model and incentives when evaluating an expanded relationship.

Can your CPA firm provide outsourced accounting or advisory services?

Yes, in some circumstances a CPA firm can provide non-attest services to an attest client, but the applicable independence requirements depend on the organization, service and relationship involved.

Private companies and nonprofits operate under different independence frameworks than SEC registrants, and CPA firms may perform certain non-attest services for attest clients when applicable requirements are satisfied.

That makes an important distinction necessary.

"Is this arrangement permitted?" and "Is this the best structure for our organization?" are not necessarily the same question.

Executives and boards should consider both.

A service arrangement may be permissible while still deserving a broader discussion about independence, governance, concentration of services, future flexibility and whether the firm is the best provider for that particular need.

What is auditor independence, and why does it matter?

Auditor independence is fundamental to confidence in the audit process.

One of the central principles behind auditor independence is that an auditor should not be placed in the position of auditing its own work or functioning as management.

But independence involves more than technical compliance.

Organizations should also consider independence in appearance. Would a reasonable lender, investor, donor, regulator or other stakeholder view the relationship as independent?

That question becomes increasingly relevant as a single professional services firm takes on more responsibilities within an organization.

If your CPA firm performs your audit while also providing other services, leadership should understand what services are being provided, who is responsible for management decisions and what safeguards are required.

Should you use your auditor for outsourced accounting, CFO or Controller services?

There is no universal answer.

Your CPA firm may have excellent professionals and may be the appropriate provider for a particular advisory service.

But convenience alone should not make the decision.

Before expanding the relationship, consider:

• Does the firm have the best expertise for this specific need?
• Are there specialized non-attest providers that should also be evaluated?
• How will the arrangement affect auditor independence or future audit options?
• Are we becoming overly dependent on one professional services provider?
• How does the firm's delivery model compare with other available options?
• Have pricing, qualifications and alternatives been evaluated independently?

The objective should not be to avoid CPA firms for advisory services. It should be to select providers intentionally and understand the consequences of each relationship.

Could using your CPA firm for non-attest services limit your future choice of auditor?

Potentially, which is why future audit optionality should be part of the decision.

Qualified audit firms can be a scarce resource, particularly for organizations operating in specialized or highly regulated industries.

An organization might have only a handful of CPA firms in its market with the appropriate audit experience, while having a much larger pool of qualified providers capable of delivering outsourced accounting, interim CFO, Controller, FP&A, analytics or staffing services.

If one of your strongest potential future auditors becomes deeply embedded in your accounting operation, changing auditors later may become more complicated.

That does not automatically mean the relationship should be avoided. It means leadership should understand the tradeoff.

Preserving future audit optionality is a legitimate factor when choosing providers for non-attest services.

How is offshoring changing accounting services?

Offshoring is another important part of the accounting profession's changing delivery model.

Accounting firms increasingly access professionals in India, the Philippines, South Africa, Eastern Europe and other global markets. According to research cited in the full ProNexus resource, approximately 25% of more than 1,100 accounting firms participating in the AICPA's 2023 National Management of an Accounting Practice survey reported outsourcing work to offshore workers.

There are legitimate reasons for using offshore resources. Global delivery can expand capacity, provide access to skilled professionals and help address talent constraints.

Organizations should still understand how their work is being delivered.

Questions to ask include:

• Who is actually performing our work?
• Where are those professionals located?
• Who supervises and reviews the work?
• What financial information and systems can they access?
• What cybersecurity and confidentiality protections apply?
• How is the provider's delivery model reflected in the value and pricing we receive?

Transparency around the delivery model helps organizations make a more informed comparison between providers.

What should nonprofit boards consider when hiring a CPA firm for additional services?

Nonprofit organizations can face additional governance considerations.

For example, a partner, executive or employee of a CPA firm may serve on a nonprofit board, and the organization may also retain that firm for paid professional services.

That does not automatically make the arrangement improper, but it deserves careful review.

IRS Form 990 and Schedule L guidance addresses certain business transactions involving nonprofit directors and affiliated entities. Depending on the individual's relationship, financial interest, transaction size and other circumstances, these arrangements can create reporting considerations and may affect whether a director is considered independent for Form 990 purposes.

Nonprofit boards should consider questions such as:

• Was the relationship appropriately disclosed?
• Did the board member participate in selecting the firm?
• Did the individual recuse themselves where appropriate?
• Were competing providers considered?
• Was pricing independently evaluated?

And perhaps the most useful governance question:

Would we have selected this provider if its representative did not hold a seat on our board?

How is private equity changing the accounting profession?

Private equity investment has become another significant development within the accounting industry.

Private equity is not inherently a problem. Capital can help firms fund technology, recruiting, acquisitions, new capabilities and innovation.

It can also change the economics and organizational structures surrounding professional services.

Private-equity-backed accounting firms increasingly use Alternative Practice Structures (APSs) that separate an attest entity from a non-attest business containing tax, consulting and other services. This can facilitate outside investment while preserving required ownership of the attest practice.

Independence requirements surrounding these evolving structures continue to receive attention within the profession.

For executives and boards, the practical question is not simply whether a CPA firm has outside investment.

It is to understand who you are engaging, how the organization is structured, what services each entity provides and how those relationships could affect independence or your future options.

10 questions to ask before giving your CPA firm additional work

Before awarding substantial non-attest work to your current auditor, or to a firm you may want to use as your auditor in the future, consider asking:

• Why is this firm the best provider for this specific service?
• Could a specialized non-attest firm provide equal or greater expertise?
• Who will actually perform the work, and where are they located?
• What portion of the work will be performed offshore?
• Who supervises the work and takes responsibility for it?
• Could this relationship create an independence issue today or limit our options tomorrow?
• Are board, ownership or financial relationships creating governance considerations?
• Are we becoming unnecessarily dependent on one provider?
• Are we preserving enough qualified future audit alternatives?
• Would we be comfortable explaining the entire relationship to our stakeholders?

These questions are not designed to steer organizations away from CPA firms. They are designed to help executives and boards evaluate professional services relationships more deliberately.

Want the deeper analysis behind these questions?

The full ProNexus executive resource explores auditor independence, offshoring, private equity, nonprofit governance, alternative practice structures and the changing economics of the accounting profession.

Be an Informed Buyer of Accounting and Advisory Services

The accounting profession is undergoing one of its most significant transformations in decades.

Private equity. Consolidation. Advisory expansion. Alternative practice structures. Offshoring. New delivery models.

None of these developments automatically make a provider or business model better or worse.

They do make informed decision-making increasingly important.

Executives and boards should understand how their professional services firms operate, evaluate the right provider for each need and consider how today's decisions may affect tomorrow's options.

Looking for an independent, non-attest perspective?

ProNexus is an independent, non-attest accounting and finance firm. We help organizations evaluate their accounting and finance needs, identify the right delivery model and determine where independent support may make sense.

Our services include outsourced accounting and finance, interim finance leadership, accounting and finance staffing, retained search, analytics, technology solutions, and project-based consulting.

Have a question about your current finance and accounting model? Let's talk

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