Sir John Bourn is quitting his post as the public spending watchdog after being criticised for spending thousands of pounds on expenses including dinners and globetrotting trips with his wife.
The Liberal Democrats' spokesman, Norman Baker, who has been calling for his resignation, said he was right to step down.
Downing Street said Sir John would retire as the head of the National Audit Office from 31 January. Sir John's deputy Tim Burr will step up to replace him – but only until any reforms of the NAO have been carried out.
Sir John was praised by MPs for his work as a watchdog but became embroiled in controversy over his expenses which totalled £336,000 including 43 trips abroad over three years.
His claims included £1,718.60 for flights to Venice and £1,175.40 for flights to Lisbon for business trips on which his wife, Lady Bourn, accompanied him.
He claimed £8,593.69 for a trip to San Francisco for the Global Working Group of Auditors General in April, again accompanied by Lady Bourn, and a total of £1,651.56 for 11 business lunches and dinners.
The information came to light after the NAO made the unprecedented move of disclosing the details of Sir John's spending.
In a statement, Sir John said it had been "a privilege" to lead the NAO but said his position would clash with his other role as regulator of the auditing profession, – on the Professional Oversight Board – under changes in the Companies Act 2006.
He said: "Under these new arrangements it would be incompatible for me to hold the positions of both C&AG and chairman of the POB, I have therefore decided to relinquish the position of C&AG at the end of January 2008, when I shall have completed 20 years in the post, and continue in my position as chair of the POB."
He added: "During my term as Comptroller and Auditor General I have seen a profound change in the way government works and the role and influence of public sector auditors."
"Our work now covers topics at the heart of the public debate and our strong focus on improving outcomes leads to lasting improvements."
An investigation by the Public Accounts Commission cleared him of any wrongdoing but the PAC warned that "a more transparent system" was needed in future.
The NAO expressed concern at the lack of accountability over the public spending watchdog and is carrying out a review before recommending changes to tighten the rules governing the post. Justice Secretary Jack Straw assured MPs that legislative time would be made available to enact any changes recommended.
Mr Baker said after the announcement: "Sir John Bourn has made the correct decision and he should be thanked for the work he has done. But the next incumbent cannot end up in a position where he embarrasses the National Audit Office through expenses claims and perceived conflicts of interest."Reuse content