Analysis of Changing Institutional Environments, New Accounting Policies, and Corporate Governance Practices in Italy
The fi rst offi cial mention of fi nancial reporting in Italian law can be traced back to the Commercial Code of 1865 (which was broadly based on the Napoleonic Code).1 The Italian Commercial Code has required Italian companies to prepare fi nancial statements (FS) since its amendment in 1882. During the twentieth century, fi nancial reporting was regulated by the Civil Code of 1942, whose rules were supplemented and strongly infl uenced by fi scal regulations. The establishment of the Italian Stock Exchange and the Companies and Stock Exchange Commission (Commissione Nazionale per le Società e la Borsa [CONSOB]) in 1974 marked a fundamental change in the regulatory process. This regulatory authority was based on the US Securities and Exchange Commission (SEC). CONSOB was empowered from the outset to demand audited FS from companies quoted on the stock exchange. However, the number of companies affected was not large at the outset and is currently still limited (Riccaboni and Ghirri 1995). Notwithstanding the enactment of different regulations and reforms related to the enactment of European Union Directives over the years, the auditing market is still restricted to a limited number of companies and large part of this activity is performed by the statutory auditors (see Cameran 2008).