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
Financial TimesStephen Foley
Context & Ripple Effects
KPMG had already committed $2 billion to AI and cloud services through an expanded Microsoft partnership, making a reported effort to capture AI-enabled efficiency in a supplier contract a consequential test of whether those investments alter commercial terms. KPMG's earlier AI and cloud investment framed automation as a firmwide productivity initiative.
The episode also sits alongside Big Four efforts to use AI in advisory work: PwC's OpenAI partnership explicitly targeted complex tax, legal, and HR consulting. PwC's push to apply AI in professional services underscores that the technology is becoming part of both delivery and price negotiations.
First-order effects
Grant Thornton faces an immediate 14% reduction in the reported audit fee, transferring part of its claimed AI-driven operating savings to KPMG rather than retaining them as margin.
KPMG gains a concrete procurement benchmark: AI efficiency can be treated as a basis for lower professional-services pricing when an alternative provider is credible.
Second-order effects
Audit and consulting providers may face stronger client demands to document how automation changes staffing, turnaround, and pricing, rather than presenting AI savings as internal margin expansion.
Competitive pressure could shift AI investments from a differentiation story toward a bid-table requirement, particularly where large buyers can credibly threaten to switch providers.
Third-order effects
If similar negotiations spread, professional-services AI adoption may compress fees before it expands provider profits, accelerating a move from labor-priced engagements toward outcomes- and efficiency-priced contracts.
The trend: AI is moving into a procurement phase in which enterprise buyers seek to capture automation's productivity gains through lower vendor prices, not merely better service.
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”
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 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.
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 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]
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…
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/...
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…
This makes no business sense. — KPMG, one of the world's largest auditors of public and private companies, negotiated lower fees from its own auditors by arguing that AI will make it cheaper to do the work. — 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]
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...