Sources: KPMG negotiated a 14% lower fee for its 2025 audit by threatening to find a new accountant if Grant Thornton didn't pass on its cost savings from AI
Big Four accounting firm's move to cut fees for its own audit comes amid debate over pricing model
Financial TimesStephen Foley
Context & Ripple Effects
The fee dispute turns AI from an internal efficiency initiative into a procurement issue: a firm that invested in AI-enabled professional services, as PwC's OpenAI consulting partnership showed, is now operating in a market where clients can seek a share of the productivity gain.
It also provides a concrete audit-market example of the broader pressure on consultancies to move beyond time-based pricing toward fixed-fee or outcome-based contracts.
First-order effects
KPMG secures a lower cost for its 2025 audit, while Grant Thornton must either absorb the reduction or demonstrate why AI-related savings do not translate directly into a lower fee.
The negotiation makes AI productivity a live commercial issue between auditor and client, rather than solely an internal margin opportunity for the audit firm.
Second-order effects
Other audit clients gain a clearer precedent for requesting price concessions or using the prospect of switching providers to test whether suppliers are retaining AI savings.
Audit firms face greater pressure to quantify AI's effect on delivery costs and to defend fees with service scope, assurance quality, and risk rather than staff time alone.
Third-order effects
If such negotiations spread, professional-services firms may see AI efficiency gains competed away through buyer power, compressing the traditional link between higher productivity and higher margins.
The episode points to a gradual shift toward value- or outcome-linked pricing, though regulated audit work and its assurance requirements may slow how far that model can extend.
The trend: AI is shifting professional services from selling labor hours toward pricing that allocates automation-driven savings between providers and increasingly powerful clients.
Massive strategic blunder by KPMG, but it's absolutely right on the discount request: if accountants aren't charging less in 2026 for comparable work as previous years, they're either profiting or incompetent, none of which are good.
I joked about this before but now I'm kinda serious; AI is going to be the scapegoat for an insane amount of fraud b/c it's perfect patsy Get caught for fraud > blame auditor > auditor blames Anthropic AI model > Anthropic says “you customized our agent, that's on you not us”
I have said this to pretty much everyone who has called me in the past 18 mos about VC-backed services rollups. Incremental margin gains come at the expense of significant reduction in pricing power.
Clients, take note: “KPMG, one of the world's largest auditors of public and private companies, negotiated lower fees from its own accountant by arguing that AI will make it cheaper to do the work, according to people familiar with the matter.” https://www.ft.com/...
This is a great catch by Matt Levine. KPMG is trying to force its auditor to accept less money, since accounting work can be significantly automated by AI. But KMPG ... makes money ... from accounting. So this looks like a company accidentally announcing to the world that its [im…
KPMG, one of the world's largest auditors of public and private companies, negotiated lower fees from its own accountant by arguing that AI will make it cheaper to do the work, according to people familiar with the matter. https://www.ft.com/... [image]
KPMG threatened to drop its auditor Grant Thornton unless the firm lowered its fee to do KPMG's books. Why? Because KPMG knew Grant Thornton was using AI to do some of the accounting work, and that the service would be cheaper (so, Grant Thornton should pass the savings on). [ima…
Massive AI cost savings should come into financial accounting and auditing. FT report: KPMG threatened to take its business elsewhere if Grant Thornton, its own auditor, did not lower prices to reflect AI cost reductions. The public outcome was a 14% drop in the reported audit [i…
If you know anyone working in KPMG audit, they will tell you that their clients have already been doing this All KPMG is doing is passing on the costs to their own auditor Expect a similar chain reaction in other services businesses as well (banking, consulting, law)
This sounds exactly like the scene in the Big Short, where the ratings agency admits they just give AAA ratings because otherwise the banks would use other ratings agencies instead. [embedded post]
Not sure KMPG has thought this one through - if it is pressing its auditor to lower fees because of AI, does not that encourage its own clients to do the same? rpt here by @stephenfoleyft.bsky.social www.ft.com/content/c891...
I'm hearing that Big Tech is already doing the same thing with outside counsel — either tell them to do more for the same amount of money or accept a lower fee [embedded post]