KPMG to launch US law firm following court approval

KPMG has begun to set up a law firm in the U.S. after a court decision made it the first Big Four accounting firm eligible to practice law in the country.

The Arizona Supreme Court on Thursday granted the accounting giant final approval to obtain a license to create its own firm, KPMG Law. The move allows KPMG to greatly expand its legal offerings, for example, into services such as drafting and updating contracts and reconciling legal materials in merger-and-acquisition deals. At present, KPMG and other accounting firms offer limited legal services, such as advising clients on operations and technology for their legal teams.

KPMG has previously said its Arizona-licensed lawyers would be able to do legal work for clients across the country once it received the court’s approval. Thursday’s clearance is expected to give the firm a leg up on its Big Four rivals through an expanded revenue stream as well as create new competition for law firms.

“By combining cutting-edge artificial intelligence and advanced technology solutions with legal services, we are proud to be a first mover with this capability and to offer the most holistic range of tech-enabled services in the marketplace for our clients’ evolving needs,” Rema Serafi, vice chair for U.S. tax at KPMG, said in a statement.

In 2021, Arizona established a program to widen the public’s access to legal services, primarily to address a shortage of lawyers available to assist on family law, immigration and other issues. In most states, law firms can only be owned by lawyers; but in Arizona, the supreme court lifted that restriction in 2020.

In January, the Arizona committee that oversees the so-called Alternative Business Structure program unanimously approved KPMG’s request for a law license. But later that month, the state’s top court paused KPMG’s bid and sought more details on its application.

KPMG already practices law in roughly 80 countries, including the U.K. and Australia. Those businesses have grown in part through acquisitions of small and midsize law firms. The U.S. represents the biggest law market in the world. KPMG said it serves more than 100 clients in Arizona across its service lines.

Under the court order, however, the firm won’t be allowed to provide U.S. legal services to audit clients anywhere in the world to prevent conflicts of interest. The requirement is aimed at addressing perceived and actual conflicts of interest between clients and their counsel and aligns with existing auditor-independence rules, a court spokesman said.

“There is danger for conflicts of interest absolutely, but is that danger of a magnitude different than what we see in conflicts of interest within the legal industry? Probably not,” said David Wilkins, director of the Center on the Legal Profession at Harvard Law School.

KPMG isn’t the first accounting firm to receive Arizona court approval for the license. Aprio, a private-equity-backed, Atlanta-based firm, earlier this month said it would partner with Radix Law to create a firm in Arizona after being approved last May.

Erin Mulvaney contributed to this article.

Write to Mark Maurer at mark.maurer@wsj.com