The probe will cover financial statements issued by SIG for the calendar years ending 2015 and 2016 and will focus on the audit of cash and supplier rebates.

The news comes after SIG admitted in February, in the wake of whistleblowing allegations of accounting irregularities, that it had overstating its profits.

A forensic accounting review found that a number of balances recognised at 31 December 2016 in relation to rebates and other potential recoveries from suppliers were overstated at 31 December 2016.

The irregularity resulted in SIG’s full-year profits for 2016 being overstated by £3.7m. A £2.5m overstatement in the first half of 2017 and £0.4m overstatements were also identified.

In May, SIG’s shareholders took the unusual step of voting to remove Deloitte as the company’s external auditors.

Deloitte won the tender for the entire SIG group audit in 2005 and was paid £1.6m in audit fees last year according to the 2017 annual report.

In order for a matter to be referred for investigation by the FRC’s Executive Counsel under the Audit Enforcement Procedure (AEP) , the FRC’s Conduct Committee is required to decide whether there is good reason to investigate an Allegation in relation to a Statutory Auditor and/or a Statutory Audit Firm.

The investigation will be conducted under the AEP rules and the FRC has delegated the work to the ICAEW, which is Deloitte’s Recognised Supervisory Body (RSB).

At the conclusion of the investigation, the FRC will decide whether to bring enforcement proceedings against Deloitte and possible referral to a disciplinary tribunal.

The news comes after FRC investigations into audit practices among two Big Four firms concluded in the last month and resulted in large fines and strong criticism.

KPMG was warned of 'unacceptable deterioration' in the quality of its audit work shortly after being fined £3.2m for its audit of Quindell and PwC was issued with a record £6.5m fine for the conduct of its audit of BHS.

Report by Rob Munro