Board characteristics and higher audit quality—Evidence from Chinsese listed companies

Abstract

This paper seeks to investigate the empirical relationship between board characteristics and audit quality using OLS regression analysis. In this study, the paper uses audit fees as a proxy for audit quality and seeks to investigate whether board characteristics influence the extent of auditing, and consequently, the audit fee. The results show that board independence (proportion of external directors on the board of directors), board gender diversity (proportion of female directors on the board of directors) and board diligence (number of board meetings) are positively and significantly associated with audit fees, but board size (number of members on the board of directors) is negatively and significantly associated with audit fees. The results are consistent with the demand-based perspective of audit services, wherein firms with strong corporate governance demand additional assurance from the external auditors and higher audit quality, resulting in higher audit fees.