Overview
You are part of a senior audit team at A, a top-50 accounting firm in the U.S. A recently had a great year, earning over $200 million in revenue—$10 million more than expected. Now, there’s a big change being considered: a large private equity (PE )firm, B, wants to buy a controlling stake in A. If this happens, B may bring in new leaders and possibly break A into separate businesses. This could affect the firm’s culture, structure, and how independence rules are followed in the audit practice.
Your local audit leader is Nancy, a well-respected partner who helped A improve its quality control to meet new PCAOB standards. She’s open to the PE deal but is concerned about how it might affect audit independence and quality. She’s asking your team for a thoughtful analysis. Key stakeholders of audit firms include:1) senior audit partners,2) newer partners and other audit staff,3) auditee client management,4) regulators/standard setters, and the 5) investors / creditors who rely on audited financial statements.
Question: provide proper citations to an academic article or working papers on the topic of private equity investment in public accounting firms.