A&A Focus recap: M&A trends, non-GAAP frameworks, and how quality management and peer review intersect

The AICPA A&A Focus webcast on Aug. 6 delivered timely updates for accounting and assurance providers including information about mergers-and-acquisition activity reshaping CPA firms, the benefits and limitations of alternative accounting frameworks, and insights on how peer review considerations and the quality management (QM) standards may interact. Hosted by Bob Durak, CPA, CMGA, director–A&A Technical Services for the AICPA, and Andrew Merryman, CPA, senior manager–A&A Technical Services, the program featured Allan Koltin, CEO of Koltin Consulting Group; Lisa Simpson, CPA, CGMA, vice president–Firm Services for the AICPA; Julie Killian, CPA, principal at Raymond and chair of the AICPA’s Technical Issues Committee; and Sherry Chesser, CPA, member at Landmark CPAs and a member of the AICPA Peer Review Board.

News updates in the A&A space

Durak opened the broadcast with several timely news items. He first highlighted the FASB’s issuance of ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses for Accounts Receivable and Contract Assets, which responds to stakeholder concerns about the current expected credit losses (CECL) model. The standard provides a practical expedient, allowing entities to assume that conditions at the balance sheet date remain unchanged for the life of certain receivables and contract assets. Nonpublic entities electing the expedient may also adopt a policy to consider post-year-end collections when calculating allowances—an option not permitted under the existing CECL rules.

Turning to digital assets, Durak noted the enactment of the GENIUS Act, the first federal law governing stablecoins. The law restricts issuance to approved entities, mandates 1:1 liquid asset reserves, requires monthly reserve reporting, and calls for CPA-performed assurance engagements on those reports. Durak noted that the AICPA recently published the 2025 Criteria for Stablecoin Reporting, which serves as a comprehensive framework that supports the requirements in this new legislation.

Finally, Durak reminded auditors of the Auditing Standards Board’s exposure draft revising AU-C section 240, Consideration of Fraud in a Financial Statement Audit. He encouraged all practitioners to submit feedback by the Oct. 3 deadline, noting that even brief comment letters can influence the standard’s final form.

Mergers and acquisition trends in the profession

Opening the program, Allan Koltin and Lisa Simpson provided a wide-ranging discussion of the current firm merger-and-acquisition (M&A) environment in public accounting. Koltin described high deal volume across firm sizes, with transactions taking a variety of structures. These include outside investors like private equity taking a majority or minority investment. Wealth management, family office and other types of investors are entering into the profession as well. Traditional transactions, either between similarly sized firms or a smaller firm being acquired by a larger firm, remain active, as do carve-outs in which firms divest service lines such as governmental audits or niche practices. Firms are also exploring employee stock ownership plan (ESOP) structures.  

Koltin noted that while much of the attention has focused on large firms, the deal market is expanding to include smaller practices. He predicted that activity will increasingly reach smaller firms, outside of the commonly tracked largest 500 firms. Koltin noted that this shift represents a significant change from the early years of private equity’s involvement in the profession, when deals concentrated on the top 30 to top 100 firms. The range of potential deal participants is now broader than ever, and “size no longer matters” when it comes to attracting interest. Koltin indicated that some firm leaders explore a sale (of a portion of the firm or the entire firm) as a means to accessing capital they can use to invest in e technology and talent to maintain competitiveness or as a means to address succession planning challenges.

Simpson expanded on the motivations for both buyers and sellers. From the seller’s perspective, M&A transactions can provide immediate liquidity for partners and offer access to expanded service capabilities or geographies. Firm leaders can benefit from enhanced administrative functions around human resources, recruiting, offshoring and outsourcing solutions, technology infrastructure, and strategic planning resources. For investors, the profession’s steady revenue streams, relatively low capital requirements compared to areas like manufacturing, and a highly fragmented market make it an attractive opportunity for investment.

Simpson and Koltin discussed alternative practice structures (APS) and the history of their use in the profession. With the recent influx of outside investors, there is more discussion of how a public accounting firm separates into an attest entity (the CPA firm) and a non-attest entity that receives the outside investment.  

 The discussion touched on sector-specific considerations. Koltin observed that private equity firms continue to find value in both audit and tax services.

Simpson wrapped the discussion by emphasizing that quality, objectivity, independence, and integrity remain the profession’s ethical foundation and create the trust in and value of the CPA profession., The AICPA is reinforcing these principles across multiple initiatives. She noted that an AICPA Professional Ethics Executive Committee task force recently sought feedback after issuing a discussion memorandum featuring its preliminary conclusions about potential revisions to independence rules related to alternative practice structures designed to help firms navigate independence in complex ownership structures, as well as continued peer review focus on operational quality. Simpson stressed the importance of safeguarding the CPA brand—central to investor confidence—while maintaining personal relationships and delivering insights, even as compliance processes become more automated. She added that the AICPA is working with firm leaders,  and regulators to help firms evaluate business model changes and adapt to a rapidly evolving marketplace.

Koltin and Simpson agreed on the opportunity for firm leaders to remain competitive and successful without taking outside investment. Challenging the typical owner compensation and buyout models, identifying ways to bring younger team members into an ownership position, and looking at capital needs strategically are some of the areas firm leaders can transform to remain competitive in a changing profession.

Overview of special purpose frameworks

The program then welcomed Julie Killian to provide an overview of special purpose frameworks available as an alternative to U.S. GAAP, which marks the first installment in a planned series exploring these non-GAAP reporting options. Killian explained that such frameworks—including cash basis, modified cash basis, income tax basis, and the AICPA’s Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs)—can offer advantages for certain entities, particularly those that are privately held, owner-managed, and have straightforward accounting needs.

Key benefits include alignment with day-to-day transactional accounting, potentially reducing the number of adjustments needed to produce financial statements; simplified reporting requirements that can lower preparation costs; and more intuitive financial statements for users who may not be familiar with complex GAAP concepts. In many cases, Killian noted, financial statements prepared under a special purpose framework may closely resemble GAAP statements in terms of numerical results, particularly when the entity’s operations are relatively simple.

However, Killian emphasized that framework selection must start with an understanding of who will use the financial statements and what information they require. Acceptance by lenders or other stakeholders is critical. Many lending agreements default to requiring GAAP financial statements, which may necessitate negotiation and education with lenders to secure approval for the use of an alternative framework. She recommended that preparers present side-by-side comparisons of GAAP and special purpose framework statements to demonstrate the practical differences and highlight the suitability of the alternative.

Limitations of special purpose frameworks include less detailed disclosures, potential difficulties in comparing results with GAAP-reporting peers, and inadequate guidance for complex transactions such as derivatives, foreign currency translation, and structured financing arrangements. Killian also addressed the perception among some stakeholders that special purpose frameworks are less credible than GAAP, cautioning that while this view is not necessarily accurate, it should be considered in situations involving succession planning, potential sale to private equity, or public offerings—circumstances in which GAAP compliance may be preferred.

Killian further noted that the FRF for SMEs is undergoing its first review since its 2013 introduction, with a task force considering updates to address changes in the economic environment, including the emergence of cryptocurrency and other new asset classes. She highlighted that while FRF for SMEs is designed to be relatively stable, periodic updates ensure that it remains relevant without the constant change often associated with GAAP.

Quality management: Insights from peer review

In the final segment, Sherry Chesser returned to the program to discuss potential peer review implications of the Statements on Quality Management Standards, which are effective beginning Dec. 15, 2025. Merryman first set the stage by asking Chesser to clarify the impact of the new standards on a firm’s engagement review. Chesser clarified that for firms undergoing engagement reviews—typically those firms without audit practices—the peer review process looks familiar and would not differ from engagement reviews under the current quality control standards. However, peer reviewers will remind all firms, regardless of review type, that they must comply with the new requirements.

Chesser emphasized that there will be no deferral or grace period for noncompliance, as firms have had three years to prepare since the standards were issued.

When asked about how non-compliance with the new standards would be addressed during peer review, Chesser highlighted ongoing efforts by the Peer Review Board to develop guidance on evaluating these situations, noting that professional judgment will continue to be significant tool used by peer reviewers. For example, a firm that has robust policies and procedures in most areas but has not yet implemented certain components will cause a peer reviewer to determine if a deficiency or significant deficiency is warranted in the peer review report.

Merryman asked Chesser to provide clarity with respect to certain evaluation requirements of the Standards and how a sole practitioner would both meet these requirements and respect the independence considerations laid out by the guidance. Chesser noted the standards require several distinct reviews, or evaluations, and in performing each, sole practitioners will, by their nature, address them differently than a small or medium-sized firm. Chesser highlighted the requirements for engagement quality reviews (which requires an independent review, thus someone outside the firm), applying the guidance in the monitoring component to the practitioner’s own work (allowed by the standards) and performing the annual evaluation of the sole practitioner’s firm’s system of quality management (also allowed by the standards).  In situations where external assistance is not required, it is encouraged when additional expertise or perspective is needed.

Lastly, Chesser highlighted new and revised AICPA resources to support implementation, including a monitoring and remediation process practice aid and draft peer review checklists for evaluating both the design and operation of QM systems. She encouraged firms, reviewers, and other stakeholders to review the materials and, for the draft checklists, provide feedback to refine the guidance before it is finalized. Feedback may be provided via an email to prptechnical@aicpa.org.

Looking ahead

The Sept. 10 webcast will feature Danielle Supkis-Cheek, CPA, of Caseware, starting a new series on artificial intelligence in accounting and auditing; Tony Boras, CPA, partner with Crowe, LLP and chair of the AICPA’s State and Local Government Expert Panel, with an update or the accounting and assurance landscape and the group’s activities; and Hallie Creps, CPA, partner at KPMG, LLP and chair of the Auditing Standards Board, providing a recap of the ASB’s August meeting.

AICPA members are encouraged to attend these monthly events and review the accompanying newsletters for more in-depth coverage of these critical topics. Members can access archives of past sessions at the A&A Focus Series webpage.

— Dave Arman, CPA, MBA, is senior manager–Audit Quality at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.