ST. JOHN'S, N.L. - The fact the federal election watchdog has been called in to review expense claims filed by Conservative candidates underscores the need for Prime Minister Stephen Harper to "open the books,'' Liberal Leader Stephane Dion said Tuesday.

William Corbett, commissioner of Canada Elections, has been asked by Elections Canada to check whether advertising expenses by some Tory candidates were genuinely spent on local TV and radio spots or used to benefit the national campaign.

"It's a very serious issue,'' said Dion, who is holding a three-day Liberal caucus meeting in St. John's.

"We need to know where the expenses have been made in the riding, or by the national machine of the Conservative party, because there is a possibility that this party broke the law and had $1 million in extra spending.''

The ad expenses were incurred during the 2005-06 election campaign.

But Ryan Sparrow, a spokesman for the Conservatives, maintained the party did nothing wrong.

"The Conservative party and our local campaigns are in full compliance with the federal Elections Act,'' Sparrow said.

During the most recent election, a number of candidates received sizable payments from the Conservative party -- a transfer that is perfectly legitimate.

The Tory candidates then transferred the same amount, or close to it, back to the party in exchange for radio and television advertising. After the campaign was over, candidates applied for partial reimbursement of their expenses through Elections Canada.

So far, the federal agency has refused to reimburse them.