KPMG Cuts 400 Consulting Jobs, Phases Out Federal Auditing (1)

KPMG’s US arm announced Wednesday its second round of job cuts in a week, along with plans to phase out audit work for federal agencies.

The consulting division layoffs coupled with the audit wind-down come as the Big Four accounting and consulting firm grapples with softer demand for assisting companies with regulatory compliance, heightened interest in artificial intelligence tools, and low rates of voluntary staff departures.

KPMG said in a statement that the moves reflect a strategy shift that will enable the firm to reinvest in growing segments across its three core businesses: audit, advisory, and tax. “Disruption creates significant opportunities, and we are investing while our clients’ needs rapidly evolve,” the firm said.

Staff learned Wednesday of the roughly 400 consulting job cuts, representing about 4% of the firm’s broader advisory practice. They target slow-growing pockets of KPMG’s private-sector consulting business, such as risk services and work to modernize customer service and operations, according to a person familiar with internal firm deliberations.

Low turnover contributed to the decision to shrink the staff. But KPMG, the smallest of the Big Four accounting and advisory firms, also has seen less demand for support complying with government requirements amid a slowdown in regulatory updates, especially for the financial services sector, the person said.

Separately, KPMG said it had begun to pivot away from its work auditing US federal agencies’ financial reports.

The pivot is part of a multi-year effort to expand its public sector advisory work and to grow its audit work for private companies, the person familiar with internal firm deliberations said. More than 400 employees who have been working on those contracts will be reassigned to other parts of its business, the person said.

Last week, the firm said it would shrink its cohort of audit partners by 10%, a move aimed at boosting unit productivity.

Still some consulting lines are growing, as the firm sees demand for AI, cybersecurity, and managed services, KPMG said.

“We will continue to support our people in upskilling for the future, while evaluating the size, shape and skills of our workforce to best serve the market,” KPMG’s statement said.

Shifting Federal Strategy

The accounting and consulting firm is transitioning out of federal audit roles through a multi-year process that meets client and regulatory obligations, KPMG said Wednesday. It has prioritized advisory services for the federal government over the past few years, the statement said.

“As demand continues to grow across both Audit and Advisory, we will be redeploying our talented federal audit professionals across the firm to meet client needs,” the firm stated.

KPMG’s reported contracts across all agencies for the fiscal 2026 year-to-date total $217 million, including $184 million for professional services and $33 million for IT, according to a Bloomberg Government analysis of contracting data.

The Pentagon, for example, spent more than $776 million on auditing services work in fiscal 2025. Deloitte was the largest vendor, followed by KPMG.

Defense Secretary Pete Hegseth has promised to deliver a “clean audit” for the Pentagon’s 2028 financial statements—a pledge he reiterated during a congressional hearing Wednesday, according to prepared remarks.

KPMG’s pivot away from federal audits was reported earlier by the Financial Times. The Wall Street Journal earlier reported the consulting layoffs.