US authorities had charged Scott London in April for allegedly passing information to a golfing friend, who then traded on the share trips.
His plea agreement was announced on Tuesday at the US Attorney’s Office in Los Angeles, reports The BBC.
It came a week after the friend, Buddy Shaw, pleaded guilty to one count of conspiracy to commit securities fraud.
In his plea agreement, Mr London admitted giving Mr Shaw insider information about KPMG’s clients on at least 14 different occasions.
It includes US company Herbalife’s 2 May 2011 earnings release and United Rentals’ 16 December 2011 announcement to take over RSC Holdings.
Mr London, 50, faces a maximum term of 20 years in prison and a maximum fine of $5m (£3.3m), according to the plea agreement.
“Behaviour like this is an affront to people who follow the law and compromises the public perception in the inherent fairness of the markets by creating an uneven playing field,” said US Attorney Andre Birotte Jr.
Separately, Mr Shaw agreed to pay around $1.3m in restitution and will continue to co-operate with the investigation as part of his plea.
According to the criminal and civil charges filed in April, in addition to telling Mr Shaw, a jeweller, about the merger between RSC Holdings and United Rentals, he also told him about a takeover of Pacific Capital Bancorp by Union Bank.
In return for the information, Mr London allegedly received bags of cash and jewellery, including a $12,000 Rolex watch. According to prosecutors, the tip-offs helped Mr Shaw earn more than $1m in illegal profits.
It is thought that the authorities were first alerted to possible wrongdoing when Mr Shaw’s stockbroker noticed unusual share trading patterns.
Investigators then reportedly tape-recorded Mr London passing on information.
The scandal has hit the accountancy firm’s reputation. It resigned as auditor from a number of US companies including Herbalife and Sketchers soon after the claims emerged.
Mr London is scheduled to appear in federal court on Friday, while Mr Shaw has a sentencing hearing on 16 September.
