The UK's accounting watchdog revealed on Thursday it is investigating PwC the former external auditor of BT Group following the scandal over the telecoms group's Italian business.
A brief statement from the Financial Reporting Council (FRC) said that following initial enquiries it had commenced an investigation into the audits by PwC of the financial statements of BT Group for the years between 2015-17.
"The decision to investigate follows announcements by BT in relation to accounting issues in its Italian operations," the statement continued.
Mismanagement in BT's Italian operations emerged during summer 2016 after it was approached by a whistleblower.
Over the course of the next months the full extent of the costs of what it called "inappropriate management behaviour" were revealed to be £530m.
Italian prosecutors said at the time that they were opening their own inquiry into alleged accounting violations and embezzlement at BT Italia.
Having dismissed PwC, the company appointed rival audit group KPMG to investigate and it found “improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions”.
KPMG concluded that earning in the Italian business had been overstated for a number of years.
Shares in BT, which lost 21% on 23 January after the full extent of the accounting scandal was revealed, moved a little higher on Thursday - up 0.3% to 295p.
A PwC spokesman said in response to the FRC's announcement: "We will co-operate fully with the FRC in its enquiries. The regulator has a duty to investigate where they believe there is a public interest, in order to give confidence to the financial markets."
Capital.com contacted the FRC, but it was unable to add more clarity to an "ongoing investigation".
Bad year for Big Four
The investigation adds to a difficult year for PwC. In May the FRC fined the company a record £5m for "misconduct" in relation to the audit of Connaught, the social housing maintenance company.
An investigation into its role in an accounting scandal at Tesco was closed in June without charge.
KPMG is hardly faring better. Its auditing of Rolls Royce is being investigated after the engine builder revealed various corruption offences dating back over two decades.