After closing a platform acquisition, or when an auditor change is needed, private equity sponsors face a pivotal decision: Who will audit the portfolio company’s financials? This choice isn’t just about compliance – it’s about protecting value, enhancing transparency, and setting the stage for a successful exit.

A smart auditor selection can lead to smoother audits, stronger financial reporting, and fewer surprises during the exit process. A poor choice may increase the risk of misstatements or result in reporting delays, compliance headaches, and even lost deals.

Private company accounting alternatives

In 2025, more private equity portfolio companies are adopting the private company accounting alternatives for goodwill and intangible assets – standards introduced over a decade ago – because they’ve proven to be widely accepted by lenders, investors, and other financial statement users. These simplified approaches not only reduce complexity and cost but can also create greater efficiencies when applied thoughtfully.

When an auditor understands these nuances and can make sure management’s accounting policy elections are well supported, it can unlock real value through streamlined audits and financial reporting aligned with your investment strategy.

What to look for in a portfolio company auditor

1. Private equity proficiency

Your auditor should speak your language: Deal structures, acquisition accounting, and post-close integration.

• How many private equity portfolio companies have they served?
• Can they navigate complex deal structures with ease?
  
  

2. Industry expertise

An auditor who knows your industry can hit the ground running.

• Do they understand your portfolio company’s business model?
• Can they offer industry benchmarking insights and best practices?
  
  

3. Reputation and resources

A credible, respected, and tech-savvy audit firm builds credibility in the portfolio company’s financial reporting with prospective buyers.

• Do they have a national footprint and modern audit tools that support quality and efficiency?
• What do other private equity sponsors and portfolio companies say about working with them related to their responsiveness, integrity, professionalism, and ability to deliver a high-quality audit?
  
  

4. Tailored audit approach

One-size-fits-all doesn’t work in private equity. You need a custom fit.

• Do they tailor their audit strategy based on company size, complexity, and industry-specific risks?
• Do they demonstrate an understanding of management’s accounting policy elections, such as the private company alternatives, and assess their consistency with industry norms?
  
  

5. Strategic insight

The most effective auditors bring insight rooted in financial reporting and internal controls.

• Can they identify financial risks or inefficiencies based on audit findings?
• Do they provide clear, actionable feedback that management can utilize to improve financial reporting?
  
  

5. Independence and objectivity

A qualified auditor must be independent in both fact and appearance.

• Do they provide non-audit services (e.g., financial system implementation or valuation) that could impair independence? 
• Are there financial ties between the audit firm and the private equity sponsor, its affiliates, or the portfolio company (e.g., co-investments, loans, or management relationships)?
  
  

Build a repeatable, scalable selection process

Private equity sponsors often manage multiple audits across their portfolio. A standardized selection process helps save time and ensure consistency.

• Create a pre-vetted auditor list: Maintain a roster of qualified, trusted audit firms with private equity and industry experience.
• Use standard evaluation criteria: Score firms objectively using the criteria above.
• Prepare proposal materials early: Have financials and key documents ready to go.
• Standardize communication: Set clear expectations for data-sharing, confidentiality agreements, and updates.
• Map the onboarding process: Make sure communication and information-sharing are integrated smoothly between the new auditor and management teams.
  
  

Final thought

In today’s fast-paced deal environment, the right auditor is more than just a compliance resource – they’re a critical part of your financial reporting ecosystem. Audits help validate a company’s financial story, providing the level of transparency in financial reporting that investors, lenders, and buyers expect. When audit quality and independence are preserved, an effective portfolio company audit promotes financial discipline and credibility, factors that support stronger operations and better positioning for accelerated exits.

^{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}