Kent County Council says it could go to court to challenge a claim that it was negligent over its investments in Icelandic banks.

Council chiefs are exploring whether they can overturn the findings of a critical report issued by a public spending watchdog that said it and six other authorities failed to spot the warning signs that their money could be at risk.

In a damning report, the Audit Commission said KCC was negligent and failed to take account of other information that pointed to a deteriorating situation in Iceland.

It has also emerged KCC made an eleventh-hour bid to stop the report being published, demanding it be retracted because of what it claimed were conclusions based on "the flimsiest of evidence."

Cllr Nick Chard (Con), KCC cabinet member for finance, said KCC was exploring all options in its efforts to contest the claims by the Audit Commission, including a possible Judicial Review.

"We have not ruled anything out. We are going to explore all legal possibilities. The report is unbalanced and unfair which sidesteps the Audit Commission’s own shortcomings. We are not prepared to keep quiet- there is a matter of principle here."

The council has £50million tied up in three Icelandic banks.

It has admitted that £3.3million was deposited after it was advised against making further investments because a finance official failed to open an email.