The mayor of Tower Hamlets, who is at the centre of allegations of financial irregularities and mismanagement, has launched a legal bid to question the grounds of an official government inquiry into the council.

Lutfur Rahman, who was re-elected in a controversial election in May, has applied for a judicial review of the decision to launch an auditors' inquiry by the communities secretary, Eric Pickles, in May.

It comes after council officials received further requests for files from PriceWaterhouseCoopers who were asked by Pickles to investigate multiple allegations of wrongdoing.

The development is the first sign that the council is prepared to fight an inquiry launched by Pickles, which centres on Rahman's administration and the use of public money. The directly elected mayor, who was re-elected after the allegations came to light, has dismissed the claims as untrue and motivated by racism.

It comes a day after Pickles accused Tower Hamlets council of not providing required information for the auditors to complete their inquiry.

Pickles told the House of Commons that auditors at would continue beyond the agreed timeframe and he has ordered the council to pay the costs which are expected to amount to £1m.

He said: "The investigators PwC have informed me the council has considerably delayed the investigation by delaying the provision of key information or simply not providing it at all."

But inside Tower Hamlets, they have decided to consider taking high court action to challenge the remit of the inquiry which they say has been shifted by the secretary of state since it was ordered in May.

Rahman said: "The council has cooperated with the inspection team from the outset and this will continue whilst we attempt to secure reasonable clarification centred on the justification of the audit.

"In addition, the Department for Communities and Local Government [DCLG] has failed to provide the council with any cost estimates for the audit apart from the vague statement that costs are likely to be 'within £1m'. This cost is to be borne by local taxpayers and this lack of transparency – over what is being audited and under what grounds – is not in line with the principles of public sector transparency that the Secretary of State has himself championed."

Responding to Pickles' comments in the Commons, a Tower Hamlets council spokesperson said that the council shares the secretary of state's frustrations at the delay in the investigation.

"It is in the interests of all concerned for the report to conclude quickly but also to provide meaningful and credible findings… It is time to draw this process to a conclusion. However, the council is considering all its options and will comment further in due course."

Included in the PwC audit is an examination of the sale of at least three properties by the council – Limehouse library, Poplar town hall and a property in Sutton Street – which, it has been alleged, did not achieve value for money for Tower Hamlets' taxpayers. It has been claimed that sales aimed to help associates of Rahman or potential supporters – a claim Rahman denies.

They are also concentrating on claims made in a BBC Panorama programme that the mayor more than doubled public funding to Bangladeshi and Somali groups from £1.5m to £3.6m in the face of recommendations from council officers.

The inquiry is also examining the use of public money to fund a weekly newspaper which, it has been claimed, promoted Rahman in the run-up to the mayoral election.

An electoral commission report released on Tuesday found that Tower Hamlets' count of mayoral, local and European elections in May was inadequately resourced and poorly organised as Rahman successfully fought off a challenge by Labour.

As a result of the watchdog's inquiries, all councils will be ordered to instruct election officials and agents to only speak English to prevent suspicion of wrongdoing.

The report paints a chaotic portrait of the count over several days in May during which Rahman's supporters gathered outside the building in their hundreds, while inside there was little order among counters, agents and observers.

However, it does not address many of the most serious allegations surrounding the count because of a pending high court election petition challenging Rahman's victory.

Allegations that were put aside by the commission include intimidation of voters, presence of people not entitled to attend the count, the impact of the large numbers of Rahman's supporters at the count, and the separation of ballots and counting of votes.

The report found that slow access to the count venue and the inadequate management of resources meant there were not enough count staff.

To ensure that similar problems do not occur at next year's general election, the report recommends that the returning officer, John Williams, publish an election plan by December as well as arranging a suitable venue.

In a statement, Williams said that additional measures were introduced before the election to combat electoral fraud. He said: "These added to the complexity of the elections in Tower Hamlets and the duration of the count, but the overriding aim of a free and fair election was achieved."

A DCLG spokeswoman said: "We will robustly contest this in the courts. There are clear grounds for an investigation into Tower Hamlets in light of a wide range of evidence and public course."