Following an accounting scandal in its Italian business, BT Group has announced a write down of £530m ($661m) on its balance sheet.

BT Group had initially announced a write down of £145m but following an independent review by KPMG, it restated the loss.

KPMG’s independent review was part of a broader investigation into BT Italian operations. BT said in a statement:  “These investigations have revealed that the extent and complexity of inappropriate behaviour in the Italian business were far greater than previously identified and have revealed improper accounting practices and a complex set of improper sales, purchase, factoring and leasing transactions. These activities have resulted in the overstatement of earnings in our Italian business over a number of years.”

A KPMG spokesperson told International Accounting Bulletin that the firm was unable to comment due to client confidentiality.

PwC and its predecessor firms have been BT’s auditors since BT listed on the London Stock Exchange in 1984. A spokesperson for PwC said that they were unable to comment due to client confidentiality.

Vincent Papa, director of financial reporting policy at CFA Institute, commented: “It is hard to claim auditor culpability without a deeper probe to the facts and circumstances. Whether it was a case of wrong judgement (i.e. incompetence) or whether it is the deceptive management misrepresenting the nature of transactions to all, including the auditors. Investors would judge the auditors harshly if it was the former.”

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Papa continued: “At face value, it is hard to conclude with limited facts that auditors were privy to management’s intent to misrepresent financial performance. In situations where management fraudulently conceals or misrepresents the nature of transactions to the auditors then it is hard to blame the auditors.”

The head of BT's Continental European operation, Corrado Sciolla, is expected to resign this afternoon according to numerous media reports. From 2006, Mr Corrado was chief executive of BT Italy before his remit expanded in 2011 to include France, and since January 2013, he has been the president of BT's Continental Europe.

Two senior executives of BT’s Italian business have already been suspended last September including former chief executive Gianluca Cimini and chief operating officer Stefania Truzzoli, through the launch of an internal investigation into the financial irregularities, as reported by The Telegraph.

BT has appointed a new chief executive for the Italian business branch who will take over from 1 February 2017. The company said that the new chief executive would review the local management team and "will work with BT Group ethics and compliance to improve the governance, compliance and financial safeguards".

“We are deeply disappointed with what we have found in our Italian business,” Gavin Patterson chief executive of BT Group said in a statement. “We have undertaken extensive investigations and are committed to ensuring the highest standards across the whole of BT for our customers, shareholders, employees and stakeholders.”

T-Mobile has been the major shareholder holding almost 1.2bn shares, which is 12% of BT. Deutsche Telekom (parent company of T-Mobile) were unable to comment except that they are following developments at BT closely.

Shareholders are worried that it could get worse, which might be enough to wipe over £7bn in value from the company in minutes. Since the warning, shares have plunged more than 19pc to 209p, which has wiped off around £7.2bn in value.