Auditor-General Martin Matthews has stood down from his role, while an independent review is held about his appointment.
Mr Matthews was head of the Ministry of Transport at the time of the sacking of whistleblowers who flagged the practices of fraudster Joanna Harrison.
Harrison was earlier this year jailed for three years after she stole $726,000 from the ministry in a series of scams, she was sacked from her role as a Ministry of Transport senior manager in July last year.
New Zealand First leader Winston Peters has been calling Mr Matthews to resign from his role.
"There is too much information that points to his failure as CEO of the Ministry of Transport," Mr Peters said.
"He ignored the fraud by a senior manager and did nothing, acting only a few months out from his departure."
Mr Matthews left the ministry in June last year and was appointed as Auditor-General in November.
Sir Maarten Weavers will lead the investigation into Mr Matthews.
The Auditor-General is responsible for auditing all of New Zealand's public entities, and the position is sometimes referred to as a "watchdog" as it keeps an eye on the public sector and holds them accountable for their use of public resources and their use of the powers that Parliament gives them.
The Auditor-General audits about 3800 public entities including Government departments like Inland Revenue and the Ministry of Education, local authorities like city, district and regional councils, and public bodies like airport authorities.
NZN / Newshub.