Independence used to be a box on a checklist. Not anymore.
Between new AICPA guidance, growing PE investment in accounting firms, and rising PCAOB scrutiny, independence has become one of the most complicated and highest-stakes compliance functions a firm runs. And most firms are still managing it with spreadsheets, email chains, and a partner's memory.
Here's what's changed, why it’s hard to solve independence checks, and how Knuula is closing the gap.
The Rules Just Got More Complicated
For years, independence guidance covered the obvious: don't audit your own bookkeeping, don't own stock in your client, and rotate your partners. That baseline hasn't gone away, but three recent developments have layered new complexity on top of it.
Tax services now have their own independence framework. In July 2026, the AICPA's Professional Ethics Executive Committee (PEEC) finalized sweeping revisions to the "Tax Services" interpretation (ET §1.295.160), effective January 15, 2027. For the first time, the Code explicitly addresses tax advisory and planning…not just return prep and filing. Firms performing both attest and tax consulting work for the same client now have to evaluate self-review and advocacy threats using four specific factors:
- how confident they are the tax position holds up
- whether it reflects established practice
- whether tax authorities are likely to review it
- how material it is to the client's financial statements. PEEC deliberately avoided a bright-line test
These new standards mean more professional judgement, and more documentation, on each engagement.
Private equity ownership is rewriting who counts as "independent."
As PE investment in CPA firms accelerates, the AICPA is actively revising the rules around alternative practice structures, determining which entities count as "network firms," which individuals are "covered members," and what relationships create new independence threats. A portfolio company sitting three steps away from your audit client can now be a live independence question, not a hypothetical one.
Regulators are watching more closely, and finding more problems.
The PCAOB's own inspection data shows independence-related deficiencies climbing every year, from 7% of comment forms in 2021 to 14% in 2023. The most common failure points are:
- no evidence of audit committee pre-approval
- missing personal independence representations
- prohibited financial or business relationships that went undetected until an inspector found them.
The common thread across all three is that independence isn't a one-time gate anymore. It's a continuous obligation that changes as your clients and services evolve, and firms are expected to prove they're keeping up.
Most Firms are Still Checking Independence by Hand
Ask most firms how they run an independence check, and the answer is some version of the same manual chain:
- A partner or risk manager manually searches the prospect's corporate structure against the firm's client list, trying to catch subsidiaries, affiliates, and portfolio companies.
- If no conflict is found, the engagement moves forward, but that conflict check is only as good as whoever built the client database and remembered to update it.
- An intake form gets filled out, which is often disconnected from whatever system tracks the firm's actual client relationships.
- Someone is supposed to remember to check again at renewal or if something changes. Often, nobody does.
This process breaks down in predictable ways:
- Personal independence tracking is woefully incomplete. Even large audit firms report high rates of partners and managers failing to disclose reportable financial interests.
- Data is siloed in different systems. Client intake, conflicts checks, and independence monitoring often sit in different systems, or different spreadsheets, that never reconcile. A risk reviewer looking at one system doesn’t see the whole picture.
- New guidance raises the bar on documentation. The 2027 tax services standard requires firms to document their threat analysis against four judgment factors, engagement by engagement. That's a meaningful lift for a firm currently doing this over email in an Excel sheet.
The result is a process that's slow when it works and invisible when it doesn't, right as the rules are demanding more rigor.
How Knuula Makes Independence Checks Seamless
Knuula already holds the client, entity, and engagement data firms use to build their engagement letters. That same data is now the foundation for automated independence checks…no separate system, no re-entering client information, no spreadsheet to maintain on the side.
Here's what that looks like in practice:
- Intelligent Tracking - Assign reviews to the right people, monitor progress in real time, and maintain a complete audit trail from start to finish. No more duplicative spreadsheets, status meetings, or wondering who still has to complete their checks.
- Distributed Reviews - Spread independence reviews across partners, managers, and staff with personalized worklists. Everyone sees only what they need to review, which makes large-scale reviews practical and efficient.
- Centralized Results - Automatically aggregate every review into a single, firm-wide view. Instantly see completed reviews, outstanding items, and potential independence concerns without compiling disparate spreadsheets.
- Less manual searching, more confidence. The corporate-tree search that used to eat up a partner's afternoon becomes a query against data the firm already has. That data is now surfaced automatically, at the moment it matters, instead of buried in a pre-engagement ritual.
Independence compliance isn't getting simpler. But the way firms manage it can be. With Knuula, independence checks stop being a separate, manual chore bolted onto client onboarding and start being a natural extension of the engagement letter process firms already run every day.
