After years of wrangling and stalled talks, MEPs have agreed in principle to vote for the law, which aims to ensure auditors are better able to flag up problems at their client firms.
Companies will be told to rotate auditor every ten years, rising to 20 years if they put the work out to tender, and 24 years if the firm employs more than one auditor.
Accountants will also face restrictions on the extra advisory work they can do for audit clients.
“Although less ambitious than initially proposed by the Commission, landmark measures to strengthen the independence of auditors have been endorsed,” said commissioner Michel Barnier.
Conservative MEP Sajjad Karim – who was involved in the negotiations between the European Parliament, Commission and Council – said the time limits were “a workable compromise and a considerable improvement on the Commission’s original proposal”.
The rules are tougher than the ones set out this year by the UK Financial Reporting Council.