The accountancy regulator has opened an investigation into professional services firm PwC’s audit of collapsed retailer BHS.
The Financial Reporting Council (FRC) said its probe was into the year ending 30 August 2014, when the firm was still owned by Sir Philip Green.
PwC said it would co-operate fully with the investigation.
Sir Philip sold the chain to Dominic Chappell’s company Retail Acquisitions for £1 in March 2015.
BHS collapsed into administration just 13 months later.
FRC spokesperson Peter Timberlake said it was impossible to say how long the investigation would take because it depended on the co-operation of external parties including lawyers and auditors.
“It’s obviously of high public interest and we will resolve it as soon as we can. But it’s important that we do the right job,” he said.
If the FRC finds evidence of misconduct, the watchdog will refer the case to an independent tribunal. If the tribunal agrees with the FRC’s conclusion then it has the ability to levy sanctions including fines as well as the exclusion of individuals from the accountancy profession.
FRC’s biggest financial penalty to date has been the £3.5m imposed on Deloitte as a result of advice it gave investors involved in collapsed British carmaker MG Rover.
The Financial Reporting Council (FRC) said Deloitte had failed to spot conflicts of interest when it acted as adviser to MG Rover directors.
Earlier this month, administrator Duff & Phelps, which took control of BHS in April, was forced to admit defeat in its attempts to find a buyer for the department store
It blamed “seismic shifts” in the retail sector for the collapse of the chain.
The stores are now in the process of being wound down.