Rupert Murdoch’s News Corp Australian papers are fighting claims that they are caught up in the phone hacking scandal and are checking books for illegitimate payments made over the last few years.

News Limited, an Australian subsidiary of News Corporation, has called the claims that its papers may have been involved in phone hacking “scandalous”. However, the papers have begun a review to "confirm that payments to contributors and other third parties were for legitimate services".

Several Australian news bulletin reports suggested that some New Ltd employees were suspects in the phone hacking scandal, but all later apologised and said the claims were ungrounded.

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John Hartigan, the chairman and chief executive of Australia’s News Limited, said he did not believe his papers had been involved in phone hacking, but that such allegations demand a response.

“However erroneous the allegations, I believe it is important to deal with these perceptions constructively," Hartigan said.

In the letter, addressed to All News Limited staff in Australia, Hartigan wrote: “I have absolutely no reason to suspect any wrongdoing at News Limited,"

"We will be conducting a thorough review of all editorial expenditure over the past three years to confirm that payments to contributors and other third parties were for legitimate services," he wrote.

“I believe it is essential that we can all have absolute confidence that ethical work practices are a fundamental requirement of employment at News Ltd."

Rupert Murdoch’s News Ltd owns eight of the 12 major daily newspapers in Australia, including The Australian, the country’s only national newspaper.

In Adelaide, Brisbane and Hobart the only major daily paper is owned by News Ltd.

Murdoch's media empire in Britain has been crippled in recent days following allegations that his newspapers hacked phones and paid for private information on public figures.

Following allegations that employees of his News of the World tabloid hacked the phone of 13-year-old murder victim Milly Dowler, Murdoch shut down the tabloid on Sunday.