KPMG is being investigated by the Financial Reporting Council (FRC) over its audit of Conviviality, the owner of Bargain Booze which collapsed earlier this year.

The accountancy watchdog said it had begun investigation into KPMG’s preparation and approval of the drinks company’s financial statements for the year ended April 2017.

Conviviality fell into administration on 5 April this year resulting in its drinks wholesale and retail businesses being sold off to separate parties.

The collapse of the once-respected stock market firm came after three profit warnings in as many weeks, the first of which was blamed on an arithmetical error by a member of the finance team. A week later, Conviviality revealed it had also discovered a £30m tax bill for which it had not budgeted.

The investigation comes after KPMG was singled out by the industry regulator in a report that concluded the overall quality of the audit profession was in decline. The FRC said there had been an “unacceptable deterioration” in the quality of the firm’s work.

KPMG is already being investigated by the FRC over its role in the collapse of construction firm Carillion. The company, which was involved in the HS2 rail link as well as providing services such as cleaning prisons, went into compulsory liquidation in January with debts of £1.3bn, a pension deficit of nearly £1bn and a host of unfinished public contracts.

A spokesperson for KPMG said: “We note today’s announcement by the FRC of its investigation of the preparation, approval and audit of the financial statements of Conviviality for the year ended 30 April 2017. We believe we conducted our audit appropriately and will cooperate fully with the investigation.

“As reported by the company, it experienced margin weakness at the start of 2018 and also a significant payment to HMRC which had not been included within its short-term cash flow projections, creating a short-term funding requirement. Our audit of the company’s financial statements for the year ended 30 April 2018 had not yet commenced at the point [at] which administrators were appointed.”