IESBA guidelines: Private equity investments jeopardize auditor ethics and independence

The international ethics standard warns of systematic integrity risks in PE investments in auditing firms.

Regulatory risk analysis for PE investments

On July 31, 2025, the International Ethics Standards Board for Accountants (IESBA) published a Staff Alert on ethical and independence risks in private equity investments in accounting firms. The announcement addresses systematic threats to professional integrity before and after PE transactions.

Fundamental violations of principles identified

The alert documents specific threats to the IESBA Code principles from PE structures:

Cultural transformation: New incentive systems and growth pressures can undermine ethical commitments and compromise confidentiality obligations.

Revenue pressure: Aggressive revenue targets generate "inappropriate pressure" to behave unethically and jeopardize professional judgment.

Independence risks due to control structures

The IESBA is particularly critical of the controlling interests of PE companies:

Conflicts of interest arise when PE investors both control audit firms and hold financial interests in other clients.

Network complexity: Hard-to-identify interdependencies through new network firms create opaque dependency structures.

Expanded audit team definition: PE managers could be considered part of the audit team under certain circumstances and trigger additional independence restrictions.

Continuous compliance monitoring required

The IESBA recommends systematic monitoring processes for client relationships, service offerings and network constellations. Practices must prioritize the public interest and ensure code compliance despite PE involvement.

Stakeholder dialog intensified

The alert is the result of ongoing consultations with audit firms, professional organizations, the PE sector and regulatory and supervisory authorities. The WPK had already published its own statement on PE activities in the German audit market on July 14, 2025, which underlines the international regulatory convergence on this topic.