The FSA has called for an extension of its powers to enable it to stamp out Enron-style scandals.
FSA chairman Sir Howard Davies is said to want the regulator to gain responsibility for investigations into companies suspected of breaching accounting laws.
Davies is believed to favour a US-style regime where the US financial regulator conducts investigations into accounting abuses.
At present accounts are scrutinised only by the small financial reporting review panel.
The Financial Times reported that the government is believed to favour a "significant expansion" of the FSA's powers.
However Davies is seeking even greater powers whereby the FSA will conduct investigations into accounts.
New EU rules - likely to come into effect in the next 12 months - could mean the government is forced to give the FSA the powers it wants.
