In April 2026, the Accounting and Corporate Regulatory Authority (ACRA) issued Practice Direction No. 1 of 2026 on External Private Capital Arrangements in Accounting Entities — a document that has received relatively little attention from Singapore’s business community, yet carries real implications for every company that engages an external auditor.

This is not purely an internal matter for accounting firms. If your audit firm has received — or is seeking — investment from a private equity firm, venture capital fund, or family office, you have a legitimate governance interest in knowing what ACRA expects and how it may affect the independence of your audit.

This guide explains the Practice Direction in plain language, what it means for Singapore companies that rely on external auditors, and what questions directors and audit committees should be asking.

Why Did ACRA Issue This Practice Direction?

The Rise of Private Capital in the Accounting Sector

Globally, private equity has been moving into the professional services space — law firms, consulting firms, and increasingly, accounting firms. Large PE-backed accounting networks have emerged in the United Kingdom, Australia, and the United States, offering accounting firm partners an exit route and capital for expansion.

Singapore is not immune to this trend. ACRA notes in its announcement that there has been “growing interest in external private capital arrangements in accounting entities, both globally and in Singapore.” Such arrangements may provide capital to expand services, invest in technology, and pursue strategic acquisitions — but they can also create commercial pressures and conflicts of interest if not properly managed.

ACRA’s concern is straightforward: when a private equity firm or family office has a financial stake in an audit firm, the audit firm faces commercial incentives that may conflict with its independence obligations. The auditor is supposed to report objectively on your company’s financial position. If it is also managing investor expectations and profit margins tied to external capital, that independence may be compromised.

What Does Practice Direction No. 1 of 2026 Cover?

Scope of the Practice Direction

The Practice Direction applies to accounting entities — audit firms, public accountants, and corporate service providers registered with ACRA — that are considering or currently operating under external private capital arrangements affecting their:

  • Ownership: Minority or majority equity investments by PE firms, VC funds, or family offices.
  • Governance: Arrangements that change who makes key decisions within the accounting entity.
  • Control: Structures that give external investors the ability to direct firm operations, client relationships, or personnel decisions.

Key Regulatory Expectations for Accounting Entities

The Practice Direction sets out several key expectations for accounting entities that enter such arrangements:

  1. Early engagement with ACRA: Accounting entities are encouraged to engage ACRA before entering into private capital arrangements. ACRA has signalled a collaborative approach — it wants to be involved early, not after the deal is done.
  2. Audit independence must be preserved: The Practice Direction is explicit that audit quality, professional ethics, and independence are non-negotiable regardless of ownership structure. PE investors cannot override an auditor’s professional obligations.
  3. Governance safeguards must be implemented: Accounting entities must put in place governance arrangements that insulate audit professionals from commercial pressures created by external investors, including clear separation between investor-facing management and audit engagement functions.
  4. Transparency obligations: ACRA expects accounting entities to be transparent about the nature and extent of external capital arrangements, including appropriate disclosure to regulators.

The CALA 2025 Connection: Named Auditor Requirement

This Practice Direction comes on the heels of significant changes to audit reporting under the Corporate and Accounting Laws Amendment Act 2025 (CALA 2025), which commenced on 6 May 2026.

Under CALA 2025, audit reports for financial years ending on or after 6 May 2026 must now identify by name the public accountant primarily responsible for the engagement. This is a significant change from prior practice, where audit reports were signed off only in the firm’s name.

The combination of these two developments — CALA 2025’s named auditor requirement and the new Practice Direction on private capital — signals ACRA’s clear direction: individual accountability and professional independence in audit are being reinforced simultaneously.

For directors, this means you can now identify precisely which individual is responsible for your company’s audit. That person must be a registered public accountant with ACRA, must meet professional competence standards, and — under the new Practice Direction — must be protected from commercial pressures arising from private equity ownership of their firm.

You can read more about the full scope of CALA 2025 changes in our guide on what directors must do under CALA 2025.

What This Means for Directors and Audit Committees

Your Governance Responsibilities as a Director

Singapore directors have a duty to act in the best interests of the company. That duty extends to oversight of the financial reporting process — including the selection, appointment, and monitoring of external auditors. Understanding the full scope of director duties in Singapore is essential context for this responsibility.

If your company’s auditor is affiliated with an accounting entity that has taken on PE, VC, or family office investment, you should actively enquire whether the independence safeguards required by ACRA are actually in place.

Questions Directors Should Ask Their Auditors

Here is a practical checklist of questions directors and audit committee members should raise with their external auditors:

  1. Does your firm have any external private capital arrangements — PE, VC, or family office investment? Even minority stakes may be relevant.
  2. If so, has ACRA been engaged and has the arrangement been acknowledged or approved?
  3. What governance safeguards are in place to protect audit independence from commercial pressure? Can we see the internal policies?
  4. Who is the named public accountant responsible for our engagement? Under CALA 2025, this must now appear in the audit report.
  5. Has the audit partner’s independence declaration been updated to reflect any ownership changes at the firm level?
  6. Are there any conflicts of interest arising from shared investors or cross-referral arrangements between your firm and any PE portfolio company?

These are not adversarial questions. They are the questions a diligent board asks as part of good corporate governance — and they are entirely consistent with ACRA’s own expectations under the Practice Direction.

Does This Affect Companies That Are Audit-Exempt?

If your company qualifies as a small company and is exempt from statutory audit requirements, you may not engage an external auditor at all — in which case Practice Direction No. 1 of 2026 has no direct operational impact on you.

For reference, a private company qualifies as a small company if it meets at least two of the following criteria for two consecutive financial years:

  • Annual revenue not exceeding S$10 million
  • Total assets not exceeding S$10 million
  • No more than 50 employees

However, if you do engage an auditor — even voluntarily — or if your company is growing beyond the small company thresholds, the Practice Direction becomes relevant to your auditor selection and monitoring process.

Practical Steps for Directors: What to Do Now

The Practice Direction does not impose direct obligations on the companies that hire auditors — it is directed at the accounting entities themselves. But directors have a practical interest in ensuring their auditors comply:

  1. When next appointing or renewing your auditor, ask about external capital arrangements. Make it part of your due diligence, just as you would check the firm’s professional indemnity insurance and ACRA registration status.
  2. Review your company’s annual return and financial statements filing obligations to ensure your audit timeline is not disrupted if your auditor is undergoing ownership changes.
  3. Keep your company secretary informed of any governance concerns arising from auditor independence issues, as these may need to be reflected in board minutes or audit committee reports.
  4. For larger companies, consider updating your audit committee terms of reference to expressly include periodic review of the auditor’s ownership structure and independence safeguards.
  5. Check the ACRA Practice Directions page periodically for updates, as ACRA has indicated it will continue monitoring how private capital arrangements evolve in the accounting sector.

For the latest Singapore business news and regulatory updates on accounting and corporate governance matters, there are useful resources for directors and business owners.

Beyond corporate compliance, sound financial planning and investment decisions are equally important for business owners navigating Singapore’s evolving regulatory environment.

If you need legal advice on your governance or compliance obligations, we can point you in the right direction.

Conclusion: A New Era of Accountability in Singapore’s Audit Profession

ACRA’s Practice Direction No. 1 of 2026 is a market signal as much as it is a regulatory instruction. The era of unchecked private capital flowing into Singapore’s audit profession is over — ACRA is watching, and it expects accounting entities to manage these arrangements with the same rigour it applies to audit quality generally.

For directors and audit committees, the message is clear: know who audits your company, know who owns them, and ask the right questions. Audit independence is not just a professional obligation for your auditor — it is a corporate governance concern for your board.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries.

— The Editorial Team, Raffles Corporate Services