The Institute of Chartered Accountants of India (ICAI) is examining whether private equity investment can be permitted in the non-audit businesses of accounting firms, subject to a clear separation between assurance and non-assurance practices.
The proposal could enable accounting firms to raise external capital for consultancy, accounting and advisory services while protecting statutory audits, tax audits and compliance audits from commercial influence and conflicts of interest.
ICAI President D. Prasanna Kumar said the Institute has constituted an internal committee to study whether non-assurance services can be separated from assurance practices to facilitate private equity investment and support the growth of such businesses.
Buy Now: Income tax E-Compilation – August 2026
The committee will examine regulatory frameworks adopted in other jurisdictions where private equity participation in accounting firms has already been permitted. It will also study the ownership structures, history and experience associated with such investments before submitting its recommendations.
Audit Independence at Centre of ICAI Review
While ICAI is considering opening non-audit operations to private investors, assurance practices are expected to remain ring-fenced from such funding.
The proposed separation is intended to ensure that professionals conducting audits remain independent and are not exposed to commercial pressures arising from private equity ownership.
Kumar emphasised that audit and assurance engagements require professionals to remain free from conflicts of interest. The central issue before the Institute is whether consultancy, accounting and advisory operations can be separated effectively from audit practices and, if so, whether private equity investment should be permitted in those segregated businesses.
Under the contemplated structure, services such as consultancy, advisory and accounting could potentially operate through a separately structured entity capable of accepting private investment. Statutory audits, tax audits and other assurance functions would continue to be governed by professional-independence requirements.
Proposal May Require Amendment to Chartered Accountants Act
Any recommendation made by the internal committee will first require approval from the ICAI Council.
If approved by the Council, the proposal may also require amendments to the Chartered Accountants Act before it can be implemented. The matter would consequently have to be placed before the Central Government for consideration.
The process indicates that ICAI’s examination is presently at a preliminary stage and does not amount to an immediate policy change. The final framework, if adopted, would need to address questions concerning ownership, control, ethical obligations and the structural separation of audit and consulting services.
Global Accounting Sector Witnessing Rise in PE Investment
ICAI’s review comes amid growing private equity interest in accounting and professional-services firms across international markets.
Jean Bouquot, President of the International Federation of Accountants, described private equity participation as a relatively recent development in the global accountancy profession. He stressed that firms receiving external investment must continue to comply with professional ethics, auditing standards and independence requirements.
An IFAC study released earlier this year reportedly highlighted the rapid expansion of private equity investment in professional accountancy firms. According to the research, fewer than 200 initial or direct investments had facilitated nearly 900 subsequent transactions, demonstrating substantial consolidation in the sector.
Private equity funding can provide accounting and consultancy businesses with capital to invest in technology, recruit specialised professionals, expand into new markets and acquire other firms. At the same time, such investment can raise concerns over profitability pressures, professional judgment and auditor independence.
ICAI’s proposed ring-fencing model seeks to reconcile these competing considerations by allowing investment in commercial advisory operations without compromising the independence of audit functions.
Artificial Intelligence Reshaping Accountancy Profession
The Institute’s deliberations are also taking place at a time when artificial intelligence is transforming the accounting sector.
AI-based systems are enabling accountants to process large volumes of financial information, automate routine work and improve access to data. However, industry leaders have cautioned that technology cannot replace professional judgment, scepticism and ethical responsibility.
Lee White, Chief Executive Officer of IFAC, said younger professionals should regard technological change as an opportunity. He noted that accountants would continue to require digital capabilities, but judgment, professional scepticism and ethics would remain fundamental to their work.
White also cautioned against relying entirely on tax or accounting advice produced through artificial intelligence. Where a service is provided by a chartered accountant, professional obligations apply, and the accountant is responsible for ensuring that the advice is reliable and delivered with due care.
The risks may be greater when automated tax or accounting services are offered by entities operating outside the regulated accountancy profession, he added.
ICAI Not Planning to Certify Individual AI Software
ICAI has clarified that it does not presently intend to authenticate or approve individual artificial intelligence-based tax and accounting software products.
Kumar said technological development is advancing too rapidly for the Institute to certify particular tools on a continuing basis. He indicated that independent certification agencies could emerge in the future to evaluate such products.
The observation underscores the distinction between regulating professional conduct and endorsing particular technology platforms. Even where accountants use AI-based tools, responsibility for the accuracy and reliability of professional advice would continue to rest with the practitioner.
The internal committee’s eventual recommendations on private equity participation are expected to be significant for the future structure of accounting firms in India. A carefully designed framework could give consultancy and advisory businesses access to growth capital while maintaining strict safeguards for audit independence, professional ethics and public confidence.
