The admission by the Weir Group chairman, and author of the corporate governance recommendations on audit committees, has also prompted angry demands by a leading charity for more transparency from companies dealing with the developing world.

A statement from Weir said it had 'not been able to establish' the ultimate recipients of payments made to agents, after prices payable on oil for food contracts were increased at the request of Iraqi customers.

Sir Robert told Accountancy Age: 'I joined the board in 2002, and we have already beefed up our finance and control functions over the last two years. Our investigations have shown that we need to tighten our procedures further, and we will be doing that.'

A spokeswoman for Weir said that, because the £4.2m was an aggregated figure added on to 15 oil for food contracts over a two-year period, it would not have 'come onto our radar' during an audit. 'It accounts for 0.005% of our turnover,' she added.

Andrew Pendleton, senior trade policy officer at Christian Aid, said: 'The onus is on companies to ensure they are transparent about payments to middlemen.' He added: 'It's in companies' favour to be clear about what they are paying to whom, precisely so that murky situations like this don't arise and then need to be investigated.'