The chairman of the UK's Financial Reporting Council, Sir Bryan Nicholson, reportedly said on Sunday that an accounting watchdog for private companies should be set up in the wake of the scandal at MG Rover, in which four men were able to buy the business for £10 and pay themselves tens of millions of pounds.

The Daily Telegraph said the news came as MG Rover chairman, John Towers, denied that £400 million was unaccounted for in the company's books - he reportedly said: "Some of the calculations I have seen do not even include closing stock and assets figures. This is a simple issue of addition and subtraction that even a child of seven could cope with."

The newspaper noted that the UK government's trade and industry Patricia Hewitt, trade and industry secretary [minister] Patricia Hewitt on Friday night asked Nicholson to lead an investigation into the finances of MG Rover and its parent company Phoenix Venture Holdings - the review will be carried out by the Financial Reporting Review Panel (FRRP).

The Daily Telegraph said Nicholson is hoping to send a "first sight" report to Hewitt within four weeks, after which a more formal report will be drawn up in a "quasi judicial process" over the following months - his findings will form the basis for whether the Government orders a full DTI investigation into the collapse of the Midlands car maker.

The paper noted that the so-called Phoenix Four - Towers, Peter Beale, Nick Stephenson and John Edwards - have been heavily criticised for restructuring the car maker into a complex set of businesses. Commenting on Sir Bryan's investigation, Mr Beale told the Daily Telegraph: "Our accounts have already been the subject of intense scrutiny over the past five years and we will continue to work openly with any appointed body as we have throughout this period."

Towers reportedly added: "The suggestion that a black hole of £400 million or any other accounting irregularity could exist … is ridiculous."

The Daily Telegraph said he also claimed he was the victim of a "character assassination" over the way his remuneration had been reported. In an interview with the Sunday Mercury, he reportedly said: "My annual salary has been £200,000 and the pension I will get is £105,000, not £16 million as reported.

"If you look at the salaries of other company chairmen within the same industry, you will see that this is significantly below the average. Other bosses are paid a lot more than I was and are given larger pensions," he said, according to the Daily Telegraph.