Southwark council has suspended two senior planners following an Audit Commission report into procedures used for planning applications.
The report - published earlier this year - found that the two men, Mark Dennett and Andrew Cook, were negligent, and warned that the public could perceive their failings as corrupt.
In response to the conclusions, the council has now launched a scrutiny committee investigation into the policies and strategies of the department, the second biggest planning authority in the UK.
The investigation surrounds the failure to consult local businesses about an application from Fairview Homes to build a small residential development on the Camberwell New Road.
The Audit Commission report attacked the department's procedures on the application and recommended changes to its strategy, warning that the current system could become subject to litigation.
'In some instances, the conduct of some officers and members has not met the standards expected of public servants, ' the report says.
'Moreover, weaknesses in processes and procedures, combined with poor record-keeping, mean that officers and members are not in a position to rebut conclusively allegations of corrupt or improper practice, ' it adds.
In addition, the report warned that documents prepared for consideration by councillors were 'inaccurate, inadequate and incomplete'.
Southwark council chief executive Bob Coomber said the council took the report very seriously and would hold itself up to scrutiny with the 'express purpose of uncovering any irregularities'.
'The findings that there was maladministration causing injustice is obviously of grave concern, ' Coomber said. 'We echo the auditor's findings that people have a right to expect that officers and members carry out their duties and behave in a manner expected of public servants.
'But we welcome the auditor's view that he did not see any corroborated evidence of corrupt practices, ' he added.
Locally based developer and planning expert Roger Zogolovitch said he was unsurprised by the findings but insisted that the problems were probably down to the overwhelming bureaucracy.
'The conflict between the council members, the local groups and the mayor about what they all want from the borough has become almost untenable, ' he warned.