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LONDON, May 4 (Reuters) - Britain's accounting watchdog has opened an investigation into how KPMG checked the books of Rolls-Royce, the aero-engine group that agreed in January to pay 671 million pounds ($862.8 million) to settle a transatlantic bribery probe.
The Financial Reporting Council said its investigation would look at KPMG's audit of Rolls-Royce Group's financial statements for the year ended December 31, 2010, and of Rolls-Royce Holdings' for the years ended December 31, 2011 to December 31, 2013.
In January, a court in Britain approved an agreement between the Serious Fraud Office (SFO) and Rolls-Royce, known as a deferred prosecution agreement or DPA, that allowed the company to pay to settle a bribery probe with British, U.S. and Brazilian authorities.
"The decision to investigate follows the SFO announcement on 17 January 2017 of a Deferred Prosecution Agreement between the SFO and Rolls-Royce PLC which relates to offences including conspiracy to corrupt and a failure to prevent bribery," the FRC said in a statement.
KPMG said it was important that regulators acting in the public interest should review high profile issues.
"We will co-operate fully with the FRC's investigation, which follows the SFO's investigations into Rolls-Royce. We are confident in the quality of all the audit work we have completed for Rolls-Royce, including the 2010-2013 period the FRC is considering," KPMG said in a statement.
KPMG will stand down as Rolls-Royce's auditor this year after 26 years, the spokesman said. Under new rules, overseen by the FRC, companies are requested to consider changing their auditor every 10 years.
The FRC has powers to fine accountants and ban them from practicising.
$1 = 0.7765 pounds Reporting by Huw Jones. Editing by Jane Merriman