The FSA has referred PricewaterhouseCoopers (PwC) for investigation after failing to spot "serious" banking failures at J.P.Morgan.
Last week, the US bank was fined £33.3m by the FSA, the largest ever meted out by the regulator, following a "serious breach" of client money rules.
The FSA is now set to refer PwC to its regulators after the firm failed over a seven-year period to spot that J.P.Morgan had accidentally placed as much as £16bn of client funds into the wrong bank accounts, the Telegraph reports.
Client money from J.P.Morgan's futures and options business was not placed in a ring-fenced account as it should have been and instead became intermingled with the bank's own funds from 2002 until last July.
PwC is J.P.Morgan's main auditor, but in addition is paid separately to produce a client asset returns report for the bank, which is required by the FSA as part of the process of ensuring that customer funds are protected in the event of a firm's failure.
In this role PwC gave a clean bill of health to J.P.Morgan, despite the bank being in breach of the rules governing the handling of clients' assets.
One source told the Telegraph it would still have been the bank's responsibility to ensure the report was correct, although PwC is likely to face questioning over its actions.
The FSA has a referral arrangement with PwC's two main regulators, the Financial Reporting Council (FRC) and the Institute of Chartered Accountants in England and Wales (ICAEW).
It is understood the FSA intends to pass on the details of its investigation to both organisations to see whether PwC's conduct requires a further inquiry.
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