The Prime Minister's former "family champion" Emma Harrison has stepped down as the chairman of the welfare-to-work firm, A4e, which is at the centre of a police fraud investigation.
Ms Harrison said she was leaving as she did not want the "continuing media focus" on her to be a "distraction" for the company which has played a key role in the Government's flagship Work Programme.
Friday's announcement came after she quit her role as an unpaid Downing Street adviser amid continuing controversy over her links with government.
Meanwhile, A4e chief executive Andrew Dutton said that he has appointed the international law firm White & Case LLP to conduct an independent audit of the company's controls and procedures.
The chairman of the Commons Public Accounts Committee Margaret Hodge - who has been pressing for the Government to suspend all its contracts with A4e - welcomed the move. "I welcome the fact that they have agreed to do a total audit of the company because the grave concern I have has been around the allegations of fraud," she said. "There are still remaining questions around that. The issues of whether or not the service they provide for their clients is effective, and whether or not there's value for money, also need to be addressed."
The controversy surrounding Ms Harrison has been highly embarrassing for David Cameron who had previously been an enthusiastic supporter of her work.
The arrests last month of four former members of A4e staff were confirmed on Tuesday following a visit by Thames Valley Police to the firm's headquarters in Slough late last week. Two women aged 28 and 49, and two men, aged 35 and 41, are on police bail until mid-March.
A4e has said the investigation was one of two outstanding cases out of nine it had referred to the DWP following internal inquiries. The other concerned a subcontractor.
A4e has been under fire for paying £11 million in dividends last year, 87% to Ms Harrison, despite all its £160-£180 million UK turnover resulting from Government welfare contracts.
Despite the controversy and demands for existing work to be halted, A4e has been named as the preferred bidder for a £15 million contract with the Skills Funding Agency to provide education to prisoners in London as well as work advice on release.