The regulator has been under pressure from the Treasury select committee over an earlier supervisory inquiry the FRC carried out in 2013, which focused on the bank’s loan loss provisions.

The select committee was unhappy with the limited scope of that inquiry, and highly critical of what it saw as the FRC’s failure to open a wider ranging assessment of KPMG’s role as HBOS auditors.

On 21 January 2016 the FRC announced it was making preliminary enquiries under the accountancy scheme into KPMG’s audit of HBOS. It has now put out a statement saying that ‘the conduct committee met on Tuesday to consider the outcome of the preliminary enquiries and made a decision which following certain procedures will be announced as soon as possible.’

At the time it launched this second inquiry, the FRC said it would focus on two issues. These are the extent to which KPMG considered the appropriateness of management’s use of the going concern assumption in the preparation of the financial statements for the year ended 31 December 2007, and the extent to which the firm considered whether there were material uncertainties about the bank’s ability to continue as a going concern that HBOS needed to disclose in the financial statements.

Andrew Tyrie, chair of the Treasury select committee, then published an exchange of letters with Stephen Haddrill, chief executive of the FRC, in which he made plain his criticisms of the audit watchdog.

Tyrie told the regulator ‘given the shocking delay in initiating this work, a less than thorough job would be inexcusable,’ and said the investigation was ‘long overdue’. He also queried its scope and wanted to know what the conclusions had been from the supervisory inquiry.

In his response, Haddrill said: ‘We will publish a full report drawn from all of our work in relation to HBOS and bank auditing. This will include the findings from our supervisory inquiry in 2013; the conclusions from inspections of bank audits over many years including our thematic review of the audit of loan loss provisions; the work on going concern led for us by Lord Sharman; and our work on auditor scepticism.’

Haddrill also wrote that the timing of this subsequent report would depend on the evidence the FRC finds, and the need to ensure the findings are ‘robust’, as they may be tested by an independent tribunal.

‘Nonetheless we would hope to be in a position to report our conclusions in the spring,’ he said.KPMG has said a thorough review of the HBOS audit was in the interests of the audit profession, shareholders and society as a whole.