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Ministers in David Cameron’s administration were told that Post Office bosses had dropped a secret investigation that may have helped to prove postmaster’s innocence while continuing to deny that the Horizon computer system was faulty, it has been claimed.

A 2016 internal investigation into how and why cash accounts on the Horizon IT system had been tampered with – which spanned 17 years of records – was suddenly dropped after postmasters began legal action.

According to the BBC, ministers in Mr Cameron’s administration were told Post Office bosses had dropped the inquiry – while denying Horizon computer system was faulty.

Despite the investigation, the organisation still argued in court, two years later, that it was impossible for Fujitsu to remotely access subpostmaster accounts.

More than 700 branch managers were prosecuted by the Post Office between 1999 and 2015 after faulty Horizon accounting software made it look as though money was missing from their shops.

Hundreds of subpostmasters and subpostmistresses are still awaiting compensation despite the government announcing that those who have had convictions quashed are eligible for £600,000 payouts.

But the latest revelations raise questions as to how long ministers had been aware of the possibility of remote access and why the government did nothing to prevent the Post Office from saying that Fujitsu could not alter branch manager’s accounts.

Documents obtained by the BBC show how the secret 2016 investigation into Fujitsu’s use of remote access had come out of a review by former top Treasury lawyer Jonathan Swift QC, which had been approved by the then-business secretary Sajid Javid.

But in June that year, when sub-postmasters launched their legal action, the government was told through Post Office minister Baroness Neville-Rolfe that the investigation had been scrapped on “very strong advice” from the senior barrister representing them.

There is no evidence in the documents that then-prime minister Mr Cameron personally knew about the investigation or that it had been ditched.

A spokesperson for Lord Cameron pointed to his previous comments saying he could not remember being briefed about the Horizon scandal while he was prime minister.

The foreign secretary, who was in No.10 between 2010 and 2016, said in January: “I don’t recall in any detail being briefed or being aware of the scale of this issue.”

He added that anyone who was involved in government over the last two decades had to be “extremely sorry” for the miscarriage of justice

The revelations follow a series of explosive interactions between the former Post Office chairman, Henry Staunton and current business secretary, Kemi Badenoch, as Mr Staunton accused Ms Kemi Badenoch of making “an astonishing series of claims” and mischaracterisations after she told MPs he had spread “made-up anecdotes” following his dismissal.

The former post office boss has said that he had been told to stall compensation payouts for postmasters affected by the Horizon scandal.

In a statement to the Commons, the business secretary said there was “no evidence whatsoever” of his account and branded it “a blatant attempt to seek revenge” for his sacking.

She also claimed he was being investigated over bullying allegations before he was fired as chairman, and that concerns were raised about his “willingness to co-operate” with the probe.

Hitting back later on Monday, a spokesperson for Mr Staunton said Ms Badenoch had made an “astonishing series of claims” about the saga.

In a statement given to reporters, they said he had recorded the comment about delaying compensation “at the time in a file note which he emailed to himself and to colleagues and which is therefore traceable on the Post Office Server”.

In relation to the alleged bullying investigation, the spokesperson said: “This is the first time the existence of such allegations have been mentioned and Mr Staunton is not aware of any aspect of his conduct which could give rise to such allegations.

“They were certainly not raised by the Secretary of State at any stage and certainly not during the conversation which led to Mr Staunton’s dismissal. Such behaviour would in any case be totally out of character.”

Downing Street backed Ms Badenoch’s statement in parliament in which she said there had been an investigation into bullying allegations against Mr Staunton, with a spokesman for the prime minister confirming it was cleared with No10.

The prime minister’s official spokesman also urged the Post Office to share a note Mr Staunton claims proves he was given a so-called go slow order to delay compensation to postmasters.

“If such a note exists, we obviously would encourage the Post Office to share it so it can be investigated and we can take any action that’s necessary,” he added.

Mr Staunton, who was sacked by the business secretary last month, had used a Sunday Times interview to suggest that the alleged request to delay payouts was linked to concerns about the cost of Horizon scandal compensation heading into the election.

Ms Badenoch had said allegations relating to Mr Staunton’s conduct, including “serious matters such as bullying”, were being examined and concerns were also raised about his “willingness to co-operate” with the formal investigation.

Speaking in the Commons, she also described it as “so disappointing that he’s chosen to spread a series of falsehoods, provide made-up anecdotes to journalists and leak discussions held in confidence”.

Ms Badenoch said it had confirmed in her mind that “I made the correct decision in dismissing him”.

For Labour, shadow business secretary Jonathan Reynolds said ministers must ensure claims the government had looked to stall Horizon compensation payments are “shown to be false in no uncertain terms”.

He said: “Yet we do now have two completely contrasting accounts, one from the chairman of the Post Office, and one from the Secretary of State, and only one of these accounts can be the truth.”

Ms Badenoch reiterated her denial of the claims and said: “There would be no benefit whatsoever of us delaying compensation.

“This does not have any significant impact on revenues whatsoever. It would be a mad thing to even suggest, and the compensation scheme which Mr Staunton oversaw has actually been completed, and my understanding is 100 per cent of payments have been made, so clearly no instruction was given.”

Chair of the business committee Liam Byrne told BBC Radio 4’s Today programme: “What we could do without right now is a war of words between the secretary of state and the former chairman, what we really need is ministers writing checks to the hundreds of subpostmasters who need redress, and they’ve been waiting for too long.”

Mr Byrne said he “hopes” to be able to obtain a contemporaneous note Mr Staunton kept after being given the so-called “go slow” order.

He added: “Yesterday I invited Mr Staunton to come before the committee next week, and today we will be sending for the papers that we need to try and get to the truth.

“Crucially, we’ll be sending for that note that Mr Staunton says he made that sets out the go slow order that he says he received from senior civil servants… but which the secretary of state professed no knowledge of yesterday.”

Environment secretary Steve Barclay has given his backing to the business secretary and said that the government is focused on securing justice for subpostmasters caught up in the Horizon scandal.

He told Times Radio that Ms Badenoch is “someone who has an absolute commitment to doing the right thing by those who have suffered what is one of the biggest miscarriages of justice that our country has seen, and also in terms of the importance of statements to the House of Commons. That is something that any minister making a statement takes extremely seriously.”

Asked if he believed Kemi Badenoch, he replied: “Yes.”