David Cameron has come in for fresh criticism over the investigation into former defence secretary Liam Fox's working relationship with his friend Adam Werritty.
The Prime Minister was rounded on for failing to call in his independent adviser on ministers' interests to look at claims the ministerial code had been breached.
MPs also claimed the advisory role itself "lacks independence" after a new candidate was appointed behind closed doors by Mr Cameron.
Dr Fox resigned last year after being found guilty of breaching the code in his relations with lobbyist Mr Werritty, following allegations which were initially investigated internally by the Ministry of Defence and then by Cabinet Secretary Sir Gus O'Donnell.
The Prime Minister's former adviser on ministerial interests, Sir Philip Mawer, who quit the post shortly afterwards, has since expressed his "frustration" that Mr Cameron did not call him in to handle the case.
In its report, the Public Administration select committee (PASC) echoes Sir Philip's unease, criticising the way he "was apparently cut out of the loop altogether" despite high levels of media and public interest in the case.
The committee goes on to claim the role of independent adviser "lacks independence in practice" as it is "in the gift" of the PM and cannot instigate investigations. It criticised the "closed" appointment process for the job presided over by Mr Cameron. And it criticised the choice of Sir Alex Allan to replace Sir Philip, claiming a recently retired senior civil servant was not suitable for a position that requires demonstrable independence from government.
The PASC found "at present, the title of independent adviser is a misnomer", adding: "We do not in any way question Sir Alex's integrity, ability or commitment, but neither he nor the role to which he has been appointed is independent of government in any meaningful sense."
Committee chairman Bernard Jenkin said: "Public confidence in the enforcement of the ministerial code relies on the adviser on ministers' interests demonstrating independence from government.
"In practice, however, the role cannot be deemed independent. We are therefore recommending strengthening the powers of the adviser and opening up the recruitment process for the post. Without these changes the role must be renamed to remove the word independent from the title, reflecting the nature of the role as an adviser to the Prime Minister."