Singapore's Accounting and Corporate Regulatory Authority Says Public Accountants Must Retain Effective Control Under External Private Capital Arrangements

Singapore's Accounting and Corporate Regulatory Authority, ACRA, issued Practice Direction No. 1 of 2026 on April 6, 2026. In four pages it sets out its key considerations and regulatory expectations for accounting entities considering, implementing or operating under "external private capital arrangements." The direction defines them as arrangements "that introduce non-public accountant ownership or economic participation in an accounting entity." Its examples, which it says are not the only ones, include minority or majority stakes taken by private equity firms, venture capital funds, family offices or other outside parties, and holding company, platform or group structures. Parts of the direction follow, not the whole.

Background

The direction says there has been "growing interest" in such arrangements, "both globally and in Singapore." It names potential benefits, among them "access to capital to expand their service offerings" and the chance to "pursue strategic acquisitions." The next sentence turns. "However, changes in ownership, governance and control structures, if not properly managed, may create commercial pressures and conflicts of interest which could adversely affect audit quality."

ACRA says it "recognises the potential benefits." It also says accounting entities "should be aware of legislative requirements before embarking on such arrangements, whilst ensuring that audit quality or professional ethics are not compromised."

What the Law Already Requires

The direction sets out what the Accountants Act 2004 requires for the approval of accounting corporations, firms and limited liability partnerships. "At least two-thirds of the directors (for accounting corporations) or partners (for accounting firms and accounting LLPs) must be public accountants." And the business, so far as it relates to public accountancy services in Singapore, "must be under the control and management" of public accountants "ordinarily resident in Singapore."

A footnote says examples of control and management "include, but not limited to, day-to-day operational management, supervision and direction of audit work, implementation of quality control systems and processes, and ultimate decision-making authority over matters relating to the provision of public accountancy services." Accounting entities and public accountants must also comply with ACRA's code of conduct and ethics, which requires them to maintain independence in audit and assurance engagements.

What ACRA Expects

Accounting entities considering, implementing or operating under such arrangements, the direction says, must demonstrate continued compliance with all applicable legal and regulatory requirements, and ensure that audit quality, professional ethics and independence "are not compromised, both in substance and in form." The first expectation it lists is control. "Public accountants must retain effective control and management over the provision of public accountancy services."

On culture, it says measures to preserve and promote an ethical culture within the entity "should be implemented," among them "clear boundaries on investor involvement in audit matters and restrictions on access to confidential client information." Entities must also "assess and address the potential implications" of the arrangements on the firm's culture, including changes to financial incentives, key performance indicators, growth targets or operational pressures that "could compromise audit quality, professional judgement, or compliance with ethical requirements."

Entities should assess, the direction says, how the arrangements "may expand the firm's boundaries" to take in entities, individuals or established network relationships that "could introduce additional independence considerations," and they "will need to conduct a thorough due diligence when analysing new or revised ownership structures." The considerations it lists include financial interest conflicts "where prohibited interests may exist in audit clients or portfolio companies," and complexities arising from non-assurance services to audit clients, "particularly where growth strategies involve cross-selling services to portfolio companies or expansion through mergers and acquisitions."

The Record, and the Regulator

Accounting entities "are expected to document assessments, conclusions and safeguards, and update these in a timely manner when facts and circumstances change, including post-investment developments."

Entities considering such arrangements "should engage with ACRA early in their planning process." ACRA "will continue to monitor developments in this area," the direction says, and the direction "will be reviewed and updated as appropriate to reflect evolving practices."

In an accounting entity with outside owners, who holds the "ultimate decision-making authority" that the direction counts as part of control and management?