A council statement said: “The investigation will be conducted by the FRC’s Enforcement Division, and will consider whether the auditor has breached any relevant requirements, in particular the ethical and technical standards for auditors.
“Several areas of KPMG’s work will be examined including the audit of the company’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions.”
The move comes just days after the chairman of two parliamentary committees wrote to KPMG chairman Bill Michael.
The letter stated: “KPMG have audited their (Carillon) accounts every year since the company’s inception in 1999, receiving £29.4 million in fees in the process.
“The latest set of audited financial accounts were signed off by KPMG with an unmodified opinion in March 2017, only for the company to go bust nine months later.
“Your 2016 audit opinion noted the risks relating to estimates around revenue recognition from contracts, but concluded that there was no mat erial misstatement in the accounts.
“Yet three months later, a KPMG-led review of Carillion’s contracts resulted in a £845 million provision relating to these contracts.
“KPMG’s 2016 audit opinion outlines in detail the audit work conducted on these contracts, but concluded no provision was required. What changed?”