The ex-Post Office boss at the heart of the Horizon scandal was shortlisted to be Bishop of London in 2017, according to reports.
Reverend Paula Vennells is an ordained Anglican priest but stepped back from any major role in 2021.
Sources quoted by the BBC say she was interviewed for Bishop of London and made it to a final list of three before ultimately being unsuccessful.
Two of the sources also added that the Archbishop of Canterbury had supported her application for the role - the third-most senior in the Church of England.
She was chief executive of the Post Office at the time, before she stood down in 2019.
The Church of England said: "We never make any comment on who is a candidate, or not, in what is a confidential discernment process."
It comes as victims and campaigners welcomed her decision to hand back the honour, which came after 1.2 million people have signed a petition calling for her to be stripped of the CBE.
Ms Vennells said on Tuesday: "I am truly sorry for the devastation caused to the sub-postmasters and their families, whose lives were torn apart by being wrongly accused and wrongly prosecuted as a result of the Horizon system.”
More than 700 Post Office branch managers were prosecuted based on information from the company’s Horizon IT system.
Many had their lives ruined and some even went to prison for false accounting and fraud.
Under Ms Vennells, the Post Office repeatedly denied there were any issues with the technology.
On Wednesday, postal services minister Kevin Hollinrake suggested that Ms Vennells and other former executives involved in the scandal may have to hand back bonuses.
He warned against “trial by media” over the Horizon scandal.
But he emphasised: “We have got a statutory inquiry...that is going through a very exhaustive process, it will conclude by the end of the year.
“Then we will know who is actually responsible for this, be it individuals or organisations.
“Then we can hold people to account, including some of the questions you asked then, whether it be bonuses or indeed about prosecutions.
The spotlight is also turning on IT giant Fujitsu, who owns the faulty accounting software Horizon.
Since 2012, the company has been awarded almost 200 contracts worth billions, with growing questions about why the Government has not severed ties with the firm in the wake of the scandal.
Bosses at Fujitsu have been called to answer questions from MPs on the Business and Trade Committee next week, after an ITV drama on the scandal fuelled public attention on the issue.
The Prime Minister's official spokesman said: "In general, we consider companies' conduct as part of the formal procurement process.
"So, once the full facts have been established by the inquiry, we will make further judgments, but it's important we allow that process to take place."
