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The Financial Reporting Council is trying into into KPMG's audit of ex-Bargain Booze proprietor Conviviality, which went into administration in April.
The watchdog is investigating the preparation of the corporate's monetary statements for the 12 months to April 2017.
A KMPG spokesperson mentioned it believed its audit was performed accurately.
Conviviality bought its retail arm, together with Bargain Booze and Wine Rack, to meals wholesaler Bestway for round £7msaving greater than 2,000 jobs.
Fall from grace
In March, Conviviality found that it owed an surprising £30m tax invoice, which was attributable to be paid on the finish of the month.
Earlier within the month, the corporate had minimize its annual income forecast by a fifth, whereas chief government Diana Hunter, who had been in cost since 2013, resigned.
And on the finish of March, it introduced that an effort to boost £125m from shareholders had failed.
It was a fast fall from grace for the corporate, which had reported half-year pre-tax income of £7.4m on the finish of January.
In a assertion, KPMG mentioned: "As reported by the corporate, it skilled margin weak spot firstly of 2018 and likewise a vital fee to HMRC, which had not been included inside its short-term money move projections, creating a short-term funding requirement.
"Our audit of the company's financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed."
Greater scrutiny
The probe is the most recent blow to KPMG, which was criticised by the accountancy watchdog final month for an "unacceptable deterioration" within the high quality of its audits.
The FRC mentioned it will put KPMG beneath extra scrutiny and would examine 25% extra of its audits within the 2018-19 monetary 12 monthsthe primary time it had taken such motion.
In response, KPMG mentioned it was "disappointed" and was taking steps to enhance audit high quality.
Earlier in 2018, KPMG had been criticised over its audit of collapsed building firm Carillionspecifically, failing to query its monetary judgements.
The auditor was additionally fined £three.2m final month by the watchdog over its audit of insurance coverage firm Quindell.