The BBC admitted on Saturday it faced a "crisis of trust" after being forced to apologise for wrongly implicating a politician in child sex abuse, just weeks after the Jimmy Savile scandal broke.
The British public broadcaster suspended all investigations by its flagship current affairs programme Newsnight after it alleged that a senior Conservative party figure repeatedly abused a teenage resident of a children's home in the 1970s.
Although the Newsnight programme did not identify the politician in last week's report, former Conservative treasurer Alistair McAlpine was widely named on social networking sites as the alleged perpetrator.
McAlpine publicly denied the claims on Friday -- and hours later his accuser, Steve Messham, a former resident of the Bryn Estyn children's home in Wales, said McAlpine was not his abuser and had been a victim of mistaken identity.
"We should not have put out a film that was so fundamentally wrong. What happened here is completely unacceptable. In my view the film should not have gone out," BBC Director-General George Entwistle told BBC radio on Saturday.
He said he had not been aware of the programme until it had gone out, but said it was signed off by lawyers and senior management.
He confirmed he had suspended all Newsnight investigations and had asked for a review into what had happened to be on his desk by Sunday.
Closing Friday's edition of the programme, anchor Eddie Mair summed up the grim mood with the sign-off: "Newsnight will be back on Monday. Probably."
Entwistle said it would be "absolutely disproportionate" to consider closing down the 32-year-old programme.
But he admitted the damage the latest row had caused the corporation as it came on the heels of allegations that Savile, one of the BBC's top presenters before his death last year, sexually abused hundreds of children over a 40-year period.
"This is a bad crisis of trust," Entwistle said, while adding: "It would be absolutely wrong to slur by extension the rest of the amazing work that is going on across the rest of BBC News."
The BBC has already launched three investigations into the Savile scandal, including one into why Newsnight shelved an investigation into some of the claims against Savile last December.
The broadcaster said on Friday it was suspending all co-productions with the Bureau of Investigative Journalism, with which it worked on the programme into the children's home abuse.
Lawyers for McAlpine meanwhile said they would be pursuing legal action against "all media who have defamed Lord McAlpine's reputation and published defamatory statements".
The politician, who blasted the claims as "wholly false and seriously defamatory", said he was forced to publicly deny them after he was named directly on the Internet and "by innuendo" in the written and broadcast media.
He said he had never been to any children's home, let alone the Bryn Estyn facility in Wrexham, north Wales. "I did not sexually abuse Mr Messham or any other residents of the children's home in Wrexham," he said in a statement.
Messham has offered his "sincere and humble" apologies to McAlpine, who served under former premier Margaret Thatcher, and suggested that it was the police who wrongly identified the politician as his alleged abuser.
The British press said the BBC was in "chaos", and one commentator for The Guardian newspaper wrote: "The latest error could not be much more serious for the BBC's journalistic reputation."
Prime Minister David Cameron warned Thursday against a "witch-hunt" following the Savile scandal, after he was ambushed during a live television interview with a list of names of alleged paedophiles compiled from Internet gossip.