The government is to press ahead with a dramatic shake-up of the UK's corporate governance rules following high profile corporate collapses.

Following the Enron and WorldCom scandals ministers commissioned a new set of recommendations governing company audits and boardroom regulation.

Under the legislation unveiled in the Queen's Speech, the regulations of audit rules are to be toughened - with increased powers to investigate companies suspected of malpractice.

Auditors are to be given new powers to obtain information from directors and employees.

In future directors will be forced to state that they have not withheld any information from their auditors.

And companies will be forced to reveal whether they have bought any other services from their auditors.

This follows fears that firms such as Anderson were too commercially involved with firms they were also meant to be auditing.

The Inland Revenue will also be permitted to pass on information about suspect accounts discovered through its tax investigations.

The DTI will also seek to strengthen the Financial Reporting Panel's role in enforcing accounting requirements.

The government is also examining ways to curb excessive pay offs to failed directors, although it is not thought the measure will be contained in the Companies (Audit, Investigations and Community Enterprise) Bill.

Business groups said they were satisfied that the legislation would not adversely effect their ability to trade.

CBI deputy director general John Cridland said: "We support the broad thrust of the post Enron reforms aimed at securing the first rate reputation of the UK's corporate governance regime."