KPMG Australia is reducing its workforce by about 5% as the firm continues to deal with the fallout from a scandal involving confidential client information and faces a subdued economic outlook.The cuts will affect 27 partners and about 360 employees, with consulting and business services expected to account for most of the reduction.The move comes as the firm undergoes a leadership overhaul following allegations that staff used inside information to secure lucrative audit contracts. The allegations were made by whistleblowers in March and have since brought KPMG Australia under intense scrutiny from the Australian government and major corporate clients.John Sams, who became KPMG Australia’s CEO last month, acknowledged the challenges that the firm is facing.“We recognise the challenges created by our own failings, and the work we must continue to do to rebuild trust,” Sams said in a statement cited by Reuters .KPMG Australia said it expected economic growth to remain subdued until at least 2028. It said this would weigh on client investment and result in longer decision-making timeframes.“While these conditions are likely to persist, we remain focused on what we can control,” Sams said.Revenue falls as consulting business takes hitThe firm’s revenue fell 1% to $1.6 billion in the year ended June 2026. Consulting revenue dropped 17%, with the loss of government contracts contributing to the decline.However, four of KPMG Australia’s five divisions recorded higher revenue during the year. Deal advisory and infrastructure revenue increased 3%, while tax and legal, and audit and assurance each recorded 11% growth. Revenue in the mid-market and private division rose 6.4%.Average pay for equity partners declined 13% during the year as KPMG dealt with the impact of the scandal and reviewed its costs.The controversy has also resulted in several senior departures, including the firm’s former CEO, audit boss and chairman, as well as senior audit partners.Government scrutiny intensifiesKPMG Australia has agreed not to bid for new federal government work until September 30. The Australian government said in June that reviews into the firm’s governance, culture, ethics and integrity were underway.The latest developments come as the government considers wider changes to the country’s accounting sector. Last month, it said it was considering breaking up the Big Four: KPMG, Deloitte, EY and PwC.The firms currently operate as partnerships rather than companies and are therefore not subject to supervision by Australia’s corporate regulator. That arrangement could change under reforms being considered by the government.The sector has faced a series of controversies in recent years. A tax leaks scandal at PwC in 2023 prompted parliamentary inquiries, although most of the recommendations have yet to be implemented.Alongside the workforce reduction, KPMG Australia said it planned to simplify parts of its structure, with the aim of creating more integrated teams and aligning them more closely with its global advisory services.