Big Four accountant EY is under investigation over its audit of the Post Office following the Mr Bates Horizon IT scandal.
The Financial Reporting Council (FRC) watchdog is examining the standard of audits from March 2015 to 2018.
The scandal saw the Post Office prosecute hundreds of innocent postmasters and postmistresses following the introduction of the faulty Horizon software.
More than 900 were wrongly prosecuted and jailed for theft, false accounting and other offences between 1999 and 2015 in cases based on flawed data.
Many more staff were bankrupted and shamed publicly, causing them significant distress.
Although the previous government said that people who have had convictions quashed are eligible for £600,000 payouts, many of the victims are still waiting for compensation.
Probe: The Financial Reporting Council watchdog is examining the standard of EY’s audits relating to the Post Office IT system from March 2015 to 2018
And the scandal, which was the basis of the hit ITV drama Mr Bates Vs The Post Office starring Toby Jones, has been called the biggest miscarriage of justice in British legal history.
The FRC said that its probe will be ‘focused specifically on the role of statutory auditors in meeting the auditing standards that pertained at the time, and not the broader issues related to the Horizon IT system itself’.
The regulator said that it waited to open its investigation until public hearings as part of a wider inquiry into the scandal were complete. The formal findings are still to be published.
A spokesman for EY said: ‘We take our public interest responsibilities extremely seriously and will be fully co-operating with the FRC during their investigation.’
EY audited the Post Office’s accounts from the late 1980s until 2019 when rival Big Four firm PwC took over. The trade body, the Institute of Chartered Accountants in England and Wales, usually oversees these audits.
But yesterday the FRC said that it had ‘reclaimed’ the matter because of the ‘heightened’ public interest concerning the scandal.
EY was fined £4.9million last week over its botched audits of Thomas Cook before the travel agent collapsed six years ago.
And it was slapped with another fine on Monday – this time £500,000 – over its audit of the Scottish water firm Stirling Water Seafield Finance’s 2019 accounts.
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