KPMG has been cleared by the accounting watchdog over its auditing of HBOS in the run-up to the lender's near collapse in the 2008 financial crisis.
The Financial Reporting Council (FRC) said it had closed the investigation into KPMG's handling of HBOS's accounts, concluding that KPMG's work did not fall short of standards.
It added it does not believe there are grounds for further action.
The FRC said: "There is not a realistic prospect that a tribunal would make an adverse finding against KPMG in respect of the matters within the scope of the investigation.
"The firm's work did not fall significantly short of the standards reasonably to be expected of the audit, the test that a tribunal would apply."
The decision will come as a relief to KPMG, which has also been drawn into a mounting scandal in South Africa over its work with the politically connected Gupta family.
KPMG launched a probe 15 months ago into KPMG's HBOS auditing in 2007 amid worries over whether the accountancy giant properly considered whether HBOS was a going concern in its 2007 accounts.
Former Treasury Select Committee chairman Andrew Tyrie said at the time the FRC probe was welcome, but overdue.
HBOS was taken over by Lloyds TSB in a rescue deal in the autumn of 2008 after expanding too quickly with risky lending, weak funding and management failures.
Lloyds then had to be bailed out with £20.5 billion of taxpayer cash in 2008.
HBOS, formed from the merger of Halifax and Bank of Scotland in 2001, had said in 2008 it would be able to fund itself and did not expect market conditions to worsen, according to the FRC.
KPMG "considered and accepted this conclusion" and HBOS published its accounts in February 2008 on that basis, the FRC said.
The FRC added: "The evidence of market conditions at that time did not show this decision of HBOS or the auditor's assessment of it to be unreasonable at the time.
"The extreme funding conditions which arose in October 2008 were not anticipated."
The FRC said it conducted a "thorough" investigation, which saw it liaise with other regulators and gather expert advice from independent and experienced lawyers and audit professionals.
KPMG said : "We are pleased that the FRC has reached this conclusion after a thorough investigation.
"We have always maintained that our audit was robust and undertaken in accordance with the regulations and practice of the time."
It added industry-wide efforts have been made to improve auditing of banks.
KPMG said: "The collapse of HBOS and other examples of corporate failure and fraud in the last decade have highlighted a gap between what society expects of an audit and what an audit has been designed to do.
"Since 2008, whilst we recognise that there is more to be done, we have worked hard to contribute positively to this debate and have explored ways to close the expectation gap."
A damning review of the HBOS saga by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), which was published in November 2015, put the blame firmly on the bank's executives.
It said they were "ultimately responsible" for the demise of HBOS.
Only one former HBOS executive, Peter Cummings, has so far been punished.
He was fined £500,000 and banned for life from the industry in 2011.