Ofsted failed to uncover widespread sexual abuse in Rotherham because it took the word of local authority staff, an influential group of MPs have found.
The Commons Communities and Local Government Committee said inspectors from the watchdog focused on whether paperwork was in order rather than examining the practical care of youngsters.
The cross-party group also cautioned that Ofsted still appeared to be a "reactive organisation" instead of one that would detect the "next class of serious failure".
The committee has been looking at the institutional problems that allowed more than 1,400 children to be subjected to rape, violence and trafficking in the area over a 16-year period.
Its report concluded that Ofsted's inquiries had been "too short and narrowly focused", and relied on the "appearance of, and paperwork describing, Rotherham's systems rather than the actuality".
These officers do not appear to have passed on the concerns Risky Business raised about child sexual exploitation and Ofsted does not appear to have probed beyond what it was told.
As an organisation Ofsted was, at the time, "culturally and operationally functioning in impenetrable silos" which hampered recognition of child abuse rings.
"Ofsted's credibility is now on the line," committee chairman Clive Betts said. "Ofsted needs to accelerate the progress of joined-up inspections to ensure they really get under the skin of what is happening in local authorities."
The watchdog welcomed the report adding, "We know we didn't get it right historically in Rotherham and have apologised for those mistakes."
"We are confident their rapid improvement plan will quickly begin to turn Rotherham's failing services around," a Department for Communities and Local Government spokesman said.