KPMG’s reputation was damaged by the collapse of Carillion and scandals in South Africa and America

KPMG will stop providing consulting and tax advice to all of the large listed companies it audits after accusations that the practice has compromised its independence.

The firm will lose up to £80 million in fees, or 40 per cent of its audit turnover. It is fighting to save its reputation, which was damaged by the collapse of Carillion, the outsourcing company, and by scandals in South Africa and America.

Bill Michael, chairman of KPMG, told the firm’s 625 partners that it would phase out all but essential non-audit services for the 90 companies in the FTSE 350 index that it audits.

This puts pressure on KPMG’s Big Four rivals, PWC, Deloitte and EY, and the smaller firms Grant Thornton and BDO to follow suit.