Conducted by the FRC's Enforcement Division, the regulator's probe will work closely alongside the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure a "joined-up approach" of all matters arising from the collapse of the industry services firm.
The FRC said: "The investigation will cover the years ended 31 December 2014, 2015 and 2016, and additional audit work carried out during 2017.
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"The investigation will be conducted by the FRC's Enforcement Division, and will consider whether the auditor has breached any relevant requirements, in particular the ethical and technical standards for auditors.
"Several areas of KPMG's work will be examined including the audit of the company's use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions."
Earlier this month, Carillion crashed into liquidation with a reported £5 billion of liabilities and £29 million left in cash.
A number of regulators and Government committees are now investigating how the company collapsed, after it was signed off by accountancy firm KPMG as a 'going concern' in spring last year.
(LM/MH)
