PricewaterhouseCoopers is to pay $225m (£120m) to settle claims from shareholders in Tyco International, the US telecoms giant embroiled in a financial scandal in the early 2000s.

The Big Four firm has agreed the settlement following claims that it failed to spot a massive accounting fraud while working as the conglomerate’s auditor, according to reports.

Earlier this year Tyco had assigned claims against its former auditors to investors, after agreeing to pay $3bn (£1.5bn) to settle its own case out of court.

A PwC spokesman in the US said the firm had decided to resolve the litigation as the cost of defending the case made settlement ‘the sensible choisce for the firm’.