Capital restructuring has emerged as a compelling but complex avenue as audit firms worldwide explore innovative ownership and funding models. From private equity-backed firms in the United States to corporatised audit practices in parts of Europe, the global profession is gradually reconsidering the traditional partnership model in favour of structures that may enhance resilience, attract talent, and unlock investment for technology and quality improvements.

However, in the United Kingdom, the dialogue around capital restructuring—particularly within the audit market—is carefully shaped by a public interest imperative and a uniquely robust regulatory framework.

Global Trends: The Case for Capital and Control

Across key global markets, the traditional model of audit firms being wholly owned and managed by partners is giving way to alternative structures. In the US, several mid-tier firms have attracted private equity investments. These arrangements typically aim to infuse capital for digital transformation, expand service lines, and enhance succession planning. In Australia, ownership liberalisation has permitted non-auditors to hold shares in audit firms, provided ethical walls and safeguards remain intact.

Proponents argue that external capital enables investment in tools, systems, and talent that the partnership model often cannot sustain, especially in an era of expanding regulatory demands and margin pressures. In effect, capital restructuring is seen as a catalyst for innovation and longevity in an evolving assurance landscape.

The UK Lens: Guardrails Over Greenlights

Despite these developments, the UK’s approach has been notably more conservative—principled not by opposition but by purpose.

In its latest update issued on 25 March 2025, Richard Moriarty, Chief Executive of the Financial Reporting Council (FRC), reiterated that the regulator is not opposed in principle to capital restructuring. However, it reaffirmed that such moves must align with the duties of public interest embedded in the statutory audit regime. The FRC’s stance reflects a core belief: audit is not merely a commercial service—it is a public good. As such, any significant transformation in ownership must safeguard the profession’s independence, ethical core, and long-term credibility.

Currently, UK audit firms remain largely partner-owned entities, with only a few small firms experimenting with external capital or alternative structures. The FRC underscores that any transition must maintain compliance with UK legal requirements—particularly the rule that qualified audit professionals must control statutory audit work.

What Audit Firms Considering Restructuring Must Know

While ownership structure is ultimately a matter for the firms, the FRC’s guidance sends a clear message: capital restructuring is permissible but not unregulated. Firms must demonstrate that any changes:

• Preserve auditor independence in both appearance and substance
• Enhance or maintain audit quality, not just operational efficiency
• Comply with legal control requirements under the Companies Act
• Embed a culture aligned with the public interest, especially when leadership or governance structures shift
• Ensure any threats to auditor independence as a result of capital ownership are effectively safeguarded, both structurally and operationally.

Importantly, the FRC encourages early and confidential engagement with the firm and potential investors. This allows the regulator to explain its expectations, assess risk, and support responsible innovation without compromising public confidence.

The Cultural Equation: Beyond Capital

Capital restructuring isn’t merely a financial transaction—it reshapes the culture and governance of audit firms. It alters who makes strategic decisions, who bears liability, and who defines the future of the business. In a profession founded on trust, independence, and judgment, this cultural shift matters as much as the structural one.

As such, UK audit firms must resist the temptation to view restructuring through a purely commercial lens. They must ensure that new ownership models do not dilute accountability or create misaligned incentives.
After all, high-quality, independent audit services underpin not only investor confidence but also public trust—from pensioners and employees to creditors and society at large.

KNAV Comments

Capital restructuring offers undeniable potential: better access to funding, improved audit capabilities, and a pathway to long-term sustainability in a demanding market. However, for UK firms, this potential must be realised within a principled framework—one that prioritises independence, transparency, and the public good.

The FRC has opened the door to thoughtful reform. The profession must now walk through it with caution, clarity, and conviction.