Company bosses and other members of a firm's staff could face two years in jail or unlimited fines if they mislead auditors under planned changes to UK law.

It is already illegal to mislead an auditor, but in theory the law imposes no obligation beyond that.

In contrast, the new proposals - outlined in a White Paper on Tuesday - impose a duty to offer any information that might be relevant, and gives auditors the right to demand data.

Government ministers are planning to meet with accountants and regulators on Wednesday to discuss the proposed changes.

Could it happen here?

The moves follow a four-year review, but the need for reform of Britain's creaking company laws has come into sharp relief following the wave of accounting scandals in the US.

The hope is that by changing the rules, the chances of an Enron, a WorldCom or a Tyco happening here could be reduced.

Lawmakers in the US are now falling over themselves to increase criminal penalties for corporate bad behaviour, with the Senate taking the maximum term for cooking the books to 10 years and the House of Representatives pushing for 20.

It remains to be seen, however, whether these moves will have much practical effect, since very few executives are ever prosecuted. Civil suits are usually more successful.

Making it easier

In general, UK industry officials have welcomed the proposed changes - which would also be expected to reduce the bureaucratic burden faced by firms.

The White Paper from the Department of Trade and Industry envisages slimming down reporting requirements on small businesses, allowing them to drop both the institution of the annual meeting and the post of company secretary as long as all shareholers agree.

About 15,000 firms will also be allowed to simplfy their accounts, thanks to a rise in the threshold for being defined as a small business from �2.8m to �4.8m, the European Union maximum.