Sky News can exclusively reveal that KPMG told its 625 UK partners on Thursday that it would phase out all but essential non-audit services for the 90 FTSE-350 companies where it serves as the auditor.
The move was disclosed in a briefing note circulated by Bill Michael, KPMG's UK chairman, to update the firm's partnership on its responses to two inquiries which have the potential to radically reshape the accountancy profession.
A copy of the note has been seen by Sky News.
Sir John Kingman, the former Treasury mandarin, is reviewing the role and remit of the audit regulator, the Financial Reporting Council (FRC), while the Competition and Markets Authority (CMA) is probing the audit sector at the request of Greg Clark, the Business Secretary.
As the auditor to Carillion, KPMG is facing intense scrutiny for its oversight of the construction giant, which went bust in January with debts of more than £5bn.
KPMG earned roughly £1.5m annually as the company's auditor, with millions of pounds more earned from non-audit work.
At the retailer BHS, PwC has been accused of failing to conduct sufficient oversight of its accounts at a time when it was earning significant sums from non-audit work.
Mr Michael told KPMG partners that "to remove even the perception of a possible conflict, we are currently working towards discontinuing the provision of non-audit services (other than those closely related to the audit) to the FTSE-350 companies we audit".
"We have also been clear that this would be most impactful if implemented within a regulatory framework for all FTSE350 companies and we will be discussing this point with the CMA in due course."
The commitment is a significant one, and if adopted more widely across the 'big four' firms would potentially affect billions of pounds of revenue earned each year by the quartet of Deloitte, EY, KPMG and PwC.
Mr Michael's pledge may also be seen, however, as an attempt to position KPMG ahead of a tide already rushing towards his profession.
The FRC said last month that it was engaged in a separate piece of work that would decide "whether further actions are needed to prevent auditor independence being compromised, including whether all consulting work for bodies they audit should be banned".
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KPMG's response to the Kingman and CMA inquiries also sets out its belief that FTSE-350 companies' audit reports should include 'graduated findings' as standard practice.
Such a development, already deployed by KPMG, provides greater detail to investors on auditors' views of a company's accounts, lifting a veil on opinions currently shared only privately with audit committees.
"We tell the audit committees whether a particular audited area is 'cautious' or 'optimistic' but the published opinion currently only says whether the full statements are true and fair," said one senior audit firm executive.
Mr Michael's note to partners emphasised that significant reforms to the audit market required a global response, given the multinational nature of most large companies.
And he warned against a break-up of the 'big four', arguing that "multidisciplinary firms are the only realistic model capable of carrying out complex, multi-faceted, global audits".
"This will continue to be the case as the business landscape grows in complexity and audits come under even more scrutiny," he wrote.
The leading quartet are braced for substantial structural change, with formal ring-fencing between audit and non-audit services a potential outcome from the CMA probe.
"We are increasingly driving a more separate governance and performance management of the audit function, including clear specialisation of auditors delivering audit for public interest entities," Mr Michael said.
The KPMG chairman added that talks with industry bodies and regulators had not produced a "silver bullet" to address concerns that the audit market is too concentrated.
"Notwithstanding the significant implementation challenges, the measures we anticipate looking at include: market share limitations; shared audits; sharing of skills and resources; removing barriers to mid-tier expansion/reducing financial disincentives; and measures to strengthen the demand side, including the transparency of the tendering process and the position of audit committees," he wrote.
Mr Michael also said that regulators and other stakeholders bore part of the "responsibility for rectifying the erosion of trust", labelling the current regulatory landscape "complex and unclear".
"The FRC has, over time, acquired powers and responsibilities that do not make for a coherent or clear overall role and purpose," he wrote.
Last week, the regulator confirmed a Sky News report that Stephen Haddrill, its chief executive, would step down next year.
KPMG has endured a bruising year, with multimillion pound fines handed out to it in relation to audit clients including Ted Baker, the fashion retailer, as well as scrutiny of its Carillion role.
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However, the firm is expected to produce a strong set of financial results when it publishes them next month.
KPMG declined to comment on Mr Michael's briefing to partners.