The Financial Reporting Council said yesterday that it has launched an investigation into the role of KPMG over its role as auditor to the troubled Co-operative Bank.

The agency has said that its investigations will focus on the "preparation, approval and audit" of Co-op Bank's accounts up to 2012. KPMG has audited the Co-op Group and the Bank for more than three decades and was also the adviser on deals including the takeover of Britannia Building Society. The leading accounting and auditing firm collected £7.4 million in fees from the Co-op group.

The FRC investigations might go on for an entire year and then pave the way for a full Disciplinary Tribunal that can impose sanctions, fines and costs on the audit firm and individuals. Andrew Walker has been the audit partner for Co-op Bank from the previous five years, Jonathan Hurst is audit partner for the group and Warren Mead, the financial services, transactions and restructuring partner. The three appeared before the Treasury Select Committee in December.

It has been emerged that leading accountancy firm KPMG was banned from examining corporate loan book of Britannia Building Society during the due diligence process of the bank at the time of its takeover by Co-operative Bank. KPMG partners alleged that the accountancy firm was barred from examining its business by Britannia ahead of the takeover in 2009.