There is no doubt that there is a crisis in public confidence in the accountancy profession

John McFall

The collapse of Enron left many shareholders deprived of all their savings and caused a scandal that reached to heart of the US political establishment.

Mr McFall told BBC Radio 4's Today programme that the Enron affair had eroded public confidence - not least because of the role played by accountancy firm Arthur Andersen.

The committee is to look at the financial regulations of public limited companies as they currently stand and investigate the need for new legislation.

David Duncan, the Arthur Andersen auditor who oversaw Enron's books, has pleaded guilty in the US to ordering the shredding of Enron documents.

He has also agreed to co-operate with prosecutors - a move which could expose even more the scandal to public scrutiny.

Wide scope

Mr McFall said: "There is no doubt that there is a crisis in public confidence in the accountancy profession."

He added that he had canvassed people's views in the City and found there was a belief that "unpredictable corporate failure" like Enron could also happen in the UK.

He added: "The fact is it [the committee's scope] is not limited just to the accountants.

"Investment bankers, lawyers and other advisers are in this, so it's a very large canvas."