All the European Union's 8,000 listed companies will have to appoint a firm to check their books to minimise the risk of corporate fraud, sources familiar with the situation said today.
Member states and representatives of the European Parliament have brokered a compromise after the legislature initially resisted making auditing compulsory, even though this would merely reflect current practice, a parliamentary source said.
The fear was that such enforced harmonisation could be the first step in putting what is traditionally part of corporate governance code into hard law, and also leave little wiggle room for individual practices.
But the sources said a deal has now been reached which effectively makes auditing mandatory, but leaves room for some national differences.
"There is a statutory audit but it can be replaced by a national equivalent to give member states manoeuvring space, which is important for countries like Italy," the parliamentary source said.
"In theory there are now no deep, ideological differences between the parliament and council on this," the source added.
The compromise centres on article 39 of the so-called Eighth Company Law Directive proposed by the European Commission but needs member state and parliamentary agreement to become law.
The new law will also require a company's audit committee, which oversees the quality of a company's internal controls and governance, to have at least one independent member who is competent in accounting or auditing.
Parliamentary representatives and member states have agreed that article 39 will not be subject to so-called comitology or a provision that lets the Commission elaborate on the text later.
"The Commission would not be able to define at some future date what an 'independent director' means, which was one of the financial industry's greatest fears," an industry source said.