The Auditor General for Scotland, Robert Black, has asked Audit Scotland to carry out a review of The Gathering.
The high-profile clan meeting in Holyrood Park, which was attended by Prince Charles, lost 600,000. In January this year the firm behind the flagship event went into administration after a public sector rescue package failed to save organisers of The Gathering 2009.
An Audit Scotland spokesman confirmed the public spending watchdog was to produce a report on The Gathering.
He said: "The report will look at the governance and financial management of The Gathering event. It will include a review of the Scottish Government's decision to provide additional funding to the event in the form of a short-term loan to the event management company, The Gathering 2009 Ltd, and the subsequent write-off of debts the company owed public sector organisations."
Sarah Boyack, Labour MSP for Edinburgh Central, welcomed the announcement, saying: "Frankly it's time that the full facts were revealed."