Boris sets up full audit of City Hall finances

The panel will recommend how the Greater London Authority can be made more transparent and accountable after the damaging "dodgy grants" affair.

It will also identify areas where savings can be made and resources redirected to the new Mayor's priorities, such as tackling youth crime.

The announcement will stamp Mr Johnson's authority on City Hall and draw a line under the troubles faced by the London Development Agency under his predecessor.

Mr Johnson said: "I was elected on a promise to provide Londoners with better value for money from their taxes. I am delighted to have recruited some of the most capable and experienced people in the capital to scrutinise recent performance at the LDA and GLA and suggest ways to prevent mismanagement and waste in future.

"We will leave no stone unturned in our efforts to ensure that the LDA and GLA deliver value for money to the taxpayers of London."

He has appointed former Sunday Telegraph editor Patience Wheatcroft, a non-executive director for Barclays, to head the audit panel. The financial probity of City Hall became a key election issue after it emerged that police are investigating seven organisations linked to Ken Livingstone's equalities and policing director Lee Jasper or his associates which were given millions of pounds worth of LDA funds. The review of the LDA will focus on:

Allegations of mismanagement and corruption in the awarding of grants.

How conflicts of interest are detected and recorded.

The monitoring of grant recipients' performance in delivering what they promised.

Suggesting new processes to guarantee probity and value for money.

During the campaign Mr Johnson accused Ken Livingstone of being wasteful with taxpayers' money and pledged to give Londoners "more bang for their buck". The review of the GLA will focus on:

Publicity and advertising expenditure.

The use of external consultants and agency staff.

All areas where expenditure has grown since 2004.

Suggesting areas where savings can be made without compromising performance.

Tension is understood to be high among the former mayor's 70-strong publicity and marketing team which is expected to be the first department to be streamlined.

Mr Johnson signalled in his first speech as Mayor that he would not tolerate unsupportive officials, warning they would be "humanely euthanised".

Ms Wheatcroft said: "It is crucial to understand how public money has been wasted or misspent in the past so that we can make sure that it doesn't happen again."

Other panel members include Tory council leaders Stephen Greenhalgh and Edward Lister and businessman Patrick Frederick while forensic accountant Andrew Gordon from PricewaterhouseCoopers will act as an independent expert advisor.

The panel will deliver an interim report to the Mayor within 30 days and a final report within 60 days.