A major consultancy firm under fire for misconduct in its audit business is cutting its local workforce following a suspension from applying for new government contracts.

KPMG – one of the “Big Four” accounting firms alongside Deloitte, PwC, and EY – revealed on Aug. 24 that its annual revenue dipped 1 percent to $2.26 billion (US$1.62 billion) in fiscal 2026. The firm also warned of a rocky road ahead, with new CEO John Sams noting, “We expect difficult market conditions to continue in financial year 2027 and beyond.”

A combination of soft market conditions and a continued drop in government reliance on consultants drove a 16.9 percent revenue decrease in KPMG’s consulting business. However, the firm saw growth elsewhere, with revenue for its audit and assurance and its tax and legal arms rising 11 percent and 10.9 percent, respectively.

Following a review of its operating costs and the fallout from recent conduct and whistleblower controversies, KPMG will cut its workforce by 5 percent. The reduction will primarily impact the consulting and business services divisions, eliminating 27 partner roles and approximately 360 employees.

Despite overall revenue falling short of expectations, Sams noted that four out of the firm’s five businesses grew. “This result reflects the resilience of our business and, above all, the commitment of our people in a very challenging year,” he said. “We will continue to monitor performance closely, act when needed and consider carefully how the firm needs to be set up for the future.”

The firm’s leadership will not escape the financial hit, however, with average equity partner remuneration plunging 13 percent from the previous year.

KPMG is currently banned from bidding on federal government contracts until at least the end of September, pending the finance department’s review of its conduct. Several state governments have similarly put the firm on ice.

The firm has been engulfed in an audit leak scandal since facing a federal parliamentary committee hearing in June. During the inquiry, it was revealed that some executives had misused confidential board papers – including Lendlease documents used to support audit bids for Westpac and Dexus – to win new work and mistreated a whistleblower who had raised concerns. Labor Senator Deborah O’Neill aired the allegations in parliament, and the firm was referred to the National Anti-Corruption Commission.

The scandal has already ousted numerous executives, including former CEO Andrew Yates and chair Martin Sheppard. Sams confirmed that several internal and external reviews will wrap up in the coming months.

“Their findings will inform the next phase of our action plan and help ensure we take all necessary action,” Sams said. “We know there is more to do.”

KPMG currently holds 297 active federal contracts worth $653 million.