Corporate governance and audit features : SMEs evidence

Purpose: The purpose of this paper is to investigate the effect of corporate governance factors on audit features, namely, audit fees and the selection of Big 4 audit firms within the UK SMEs context. Design/methodology/approach: The author uses different regression models to investigate the impact of corporate governance characteristics on audit features, and employs cross-sectional time series models as well as two-stage least squares technique. In addition, the author has used logit analysis to examine the effect of corporate governance factors on the selection of Big 4 audit firms. Findings: The author provides new evidence that governance mechanisms in SMEs affect different audit features. The results show that corporate governance mechanisms are important in determining audit fees. The author detects a positive impact of board independence, audit meeting and board size on audit fees. The author also reports evidence that governance factors determine the selection of Big 4 audit firms. In particular, the author reports that independent directors and audit diligence positively affect the decision to select Big 4 audit firms. Originality/value: This paper investigates the under-researched relationship between audit features and corporate governance using UK SMEs. In so doing, the author aims to provide new insights into this relationship within the SMEs context.