The Commonwealth Auditor-General will review federal funding for the controversial WestConnex road project in Sydney.
The multibillion-dollar project will widen and extend the M4 and M5 motorways, linking them via tunnels from Haberfield to St Peters in Sydney's inner west.
It was to cost $11 billion under 2012 estimates, but by 2015 the price tag had ballooned to $16.8 billion to fast-track the project and add "significant enhancements".
The state government has coughed up $1.8 billion for the project while the federal government has committed $3.5 billion in funding, including a $2 billion concessional loan.
Shadow Transport Minister Anthony Albanese, who is also the Member for Grayndler in Sydney's inner west, requested the audit.
He says Labor has consistently raised concerns about the federal government's advanced payments for infrastructure projects such as WestConnex before the finalisation of business cases.
In a letter to Mr Albanese on Wednesday, Acting Auditor-General Rona Mellor confirmed the Australian National Audit Office would conduct a performance audit that was expected to be tabled in Parliament next year.
"The objective of the audit is to assess whether appropriate steps were taken to protect the Commonwealth's interests and obtain value for money in respect to the $3.5 billion in Commonwealth funding committed to the NSW Government for the WestConnex project," Ms Mellor said.
The project has been plagued by protests, including from inner-west residents whose properties have been forcibly acquired and demolished to make way for the construction zone.
NSW Roads Minister Duncan Gay has been contacted for comment.