On 16th April, 2002, the authors gave oral evidence to the House of Commons Treasury Committee Inquiry into Financial Regulation of Public Limited Companies which was set up following the collapse of Enron. This paper is adapted from the written submission to the Committee on which their oral evidence was based. The authors argue that the Enron collapse provides an opportunity for regulators to stand back and consider fundamental issues associated with the regulatory framework for financial reporting, auditing and corporate governance in the UK. They challenge the financial reporting framework as being muddled between the concepts of stewardship and decision usefulness. Company balance sheets are an amalgam of figures based on historical cost and accounting estimates. The increasing use of financial instruments and the inclusion of intangibles makes valuations complex and judgmental and therefore much more dfficult to audit. Incentives in the capital markets which drive the behaviour of all participants should be considered to ensure that the current system does not encourage dysfunctional outcomes and excessive rewards. The personal incentives for partners in audit firms are of particular interest as a potential key influence on auditor independence. It is suggested that non-executive directors should be mandated to protect the interests of investors. The authors counsel against kneejerk reactions to the Enron collapse as a number of changes such as the transfer of regulation of securities listing to the Financial Services Authority (FSA) and the establishment of the Accountancy Foundation need time to settle down. They believe that auditor rotation will introduce costs without clearly identifiable benefits and are opposed to wholesale banning of auditors providing non-audit services to their clients.