Paul Moore, the HBOS whistleblower, has spectacularly reignited the row over his sacking by Sir James Crosby, the bank’s former chief executive.

Mr Moore, whose written evidence to the Treasury Select Committee this week helped to force Sir James’s resignation as deputy chairman of the Financial Services Authority (FSA), has questioned the independence of KPMG — the auditor called in by HBOS to investigate his allegations that the bank was not paying enough attention to risk.

KPMG investigated claims by Mr Moore, the former head of group risk at HBOS between 2002 and 2005, that the bank was growing too rapidly — later telling the FSA and the HBOS audit committee it was satisfied there was no foundation to the claims.

Its report largely dismissed Mr Moore’s claims and said the main reason for his departure was the “personal differences” between him and other HBOS executives.

Mr Moore’s barrister, Peter Hamilton, has now written to the committee to question whether KPMG’s report could genuinely be described as independent.

He said: “In my view, since KPMG were the auditors of HBOS, KPMG could not have been regarded as independent of HBOS. It follows that the FSA should not have regarded it as independent.

“The report was not only of limited scope but reached conclusions that a properly independent tribunal would not have reached. For both those reasons it is disappointing that the FSA have appeared to accept it.

“In the light of these points the significance of Sir James Crosby’s position at the time as both chief executive of HBOS and non- executive director of the FSA should be investigated.”

KPMG has worked as HBOS's auditor since 2001, and in the past two years alone has earned nearly £23 million in fees for auditing, tax advice, information technology work and compliance advice.

The firm said today that in 2005 it investigated allegations made by Mr Moore to HBOS and the Financial Services Authority regarding aspects of the bank's internal risk function and the investigation was carried out independently by individuals that were completely separate from the audit team

The scope and terms of reference were established in consultation with HBOS's audit committee, Mr Moore and the FSA, it said.

"This piece of work had a narrow focus on regulatory compliance risk at HBOS – and did not examine the bank’s overall sales or investment strategy or any other aspects of the bank's operations". KPMG said.

KPMG’s report was provided to HBOS's audit committee and the FSA.

In a separate letter to the committee, Mr Moore’s solicitors have said the KPMG report was relied on by HBOS and the FSA to justify his dismissal.

It added: “We do not accept that the report should have been. KPMG wrote the report at the same time as they were acting as auditors of HBOS. That immediately raises issues of potential conflict.”

Mr Moore said: “I am not interested in blame even though many people will think that this is what my agenda is. People who know me will testify to this but I have to say that I do find it sad that people in such important fiduciary positions find it so difficult to admit their mistakes and to say that they are sorry. Fighting to the bitter end is always worse for all concerned.”

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