What is Big Four Firms

The purpose of this chapter is to analyze the effect that corporate governance measures have in external audit fees in two countries where this matter is not much developed: Portugal and Spain. The analysis includes a sample of 39 listed companies on the Portuguese Stock Exchange and 104 listed companies on the Spanish Stock Exchanges for the years 2013 to 2015 using an OLS regression model. For the Spanish sample, the results show that the capital hold by the Board of Directors influence negatively external audit fees. The results are in accordance with the supplier perspective which states that better corporate governance practices decrease the control risk and, consequently, audit fees. On the other hand, the Board of Directors' diligence also affected external audit fees but positively, that is, the greater the number of meetings the greater the demand for an audit with quality which result in higher fees charged (demand perspective). For the Portuguese sample it can be observed that corporate governance characteristics do not affect external audit fees.