KPMG closes U.S. federal audit practice, trims advisory staff

KPMG is shutting down its audit practice for the federal government after losing a lucrative Pentagon contract, as well as laying off 4% of its advisory practice in the U.S., the latest in a series of cutbacks at the Big Four firm.

"Over the past few years, KPMG has prioritized Advisory services for the federal government, reflecting the strength of our Audit and Federal Advisory practices," said a statement forwarded by a KPMG spokesperson. "We are transitioning out of federal audit roles through an orderly, multi‑year process, meeting all client and regulatory obligations. 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." 

According to the Financial Times, the move came after KPMG lost a $60 million-per-year contract with the Defense Department, mainly providing services to the U.S. Army. As a result, KPMG plans to move 450 of its staff in the federal audit practice to other jobs. 

KPMG has been auditing the U.S. Army for over a decade, but the Defense Department has failed to get a clean audit opinion for eight years in a row, in part due to its secretive budget and extensive overspending. Defense Secretary Pete Hegseth, who has renamed it the Department of War, has vowed to make changes, saying, "We're ending the wasteful process of agency-by-agency opinions and slashing the number of disjointed separate audits by two-thirds."

KPMG has also been reducing its audit and advisory ranks in general in the U.S. and U.K. Last week, the firm announced plans to lay off 10% of its audit partners, or about 100 partners, after not enough of them accepted a voluntary early retirement offer, which the firm characterized as part of a rightsizing effort. Last October, KPMG cut 195 staff members from its U.S. audit practice, and last month, KPMG's U.K. firm cut nearly 600 staff members in its audit practice. In 2023, KPMG laid off nearly 700 people in its advisory business, or close to 2% of its total staff in the U.S. 

Now, the firm is reducing 4% of the staff in its advisory practice, or about 400 out of 10,000 people in that business, according to the Wall Street Journal. The layoffs will mainly affect consultants who provide regulatory risk advisory, customer operations and financial services, but no partners are part of this current round.

"Our Advisory business is strong and evolving quickly," said a statement forwarded by a KPMG spokesperson. "These actions focus on a strategic realignment to make sure our people's skills and capabilities are aligned with future demand. 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. Our transactions and strategy practice, along with areas of our Consulting business like AI, cyber, forensic and managed services, are all growing. We're supporting impacted colleagues through this transition with financial assistance, access to extended health and well-being benefits and career services."