For a low-key accounting and consulting firm, KPMG is generating its share of controversy.

KPMG’s Bay St. offices will be the focus of a protest Thursday by community groups highly critical of options the firm set out in a cost-cutting study commissioned by City Hall.

The Toronto Stop the Cuts Network says the measures, including a rollback of subsidized daycare and reduced environmental protections, would gut services residents have come to depend on and contribute to a deteriorating quality of life in the city.

A spokeswoman for KPMG declined specific comment on the Core Service Review for the city.

KPMG is noted for its public sector consulting in the province, particularly for its work with the Conservative government of then-premier Mike Harris. Some of its recommendations have been controversial, others were largely welcomed.

KPMG, for example, delivered an advisory report in the late 1990s concluding that the Harris plan to overhaul welfare and put recipients to work would only succeed if substantial funds were allocated for daycare.

A Tory-commissioned report by KPMG, which came out a year before the first megacity election, forecast massive savings from amalgamation by the year 2000, but only if amalgamation triggered staff cuts, the contracting out of more road maintenance and snow removal, as well as privatizing waste-water treatment facilities and outsourcing garbage collection.

The report suggested privatizing some police functions, including fraud and white-collar crime investigations.

And KPMG said Toronto could save about $2 million by closing two fire stations arguing that the areas could be adequately served by nearby fire halls, a conclusion that was hotly contested by the firefighters’ union.

KPMG, one of the largest professional services firms in the world and one of the Big Four auditors, along with Deloitte, Ernst & Young and PwC, employs about 138,000 people and has its global headquarters in Amstelveen, Netherlands.

It offers three lines of services: audit, tax, and advisory. Its advisory services are further divided into three main categories — risk and compliance, performance and technology, and transaction and restructuring services.

According to a survey by the Bottom Line accounting newspaper, KPMG was Canada’s third-largest accounting firm in 2009 by revenue, with 418 partners and a professional staff of about 3,400.

Like most major accountancies, KPMG has seen an increasing proportion of its income from consulting work. It’s a development that has drawn fire from the profession’s major critics, including Arthur Levitt, the former head of the U.S. SEC, who says conflicts of interest inevitably occur unless consulting practices are fully separate from audit and tax operations.

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Reforms in the accounting industry were forced by scandals including the collapse of energy giant Enron Corp. in 2001 and subsequent dissolution of its auditor/adviser Arthur Andersen and the banking crisis in Iceland that implicated the sector’s auditors.

The industry says steps have been taken to make accounting more transparent, and to set up information barriers between audit and consulting operations.