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This study investigates the link between the auditing and filing choices made by a sample of 592 small private companies, which includes 419 micro-companies. It examines decisions made in connection with the 2006 accounts following the UK's adoption of the maximum EU size thresholds in 2004, and the impact of the proposed Directive on the annual accounts of micro-companies (EC 2011). The research extends the model of cost, management and agency factors associated with voluntary audit (Collis et al. 2004), and develops a complementary model for voluntary full accounts. The results show the benefits of placing full audited accounts on the public record outweigh the costs for a significant proportion of companies. In non-micro small companies, voluntary audit is determined by cost and agency factors, whereas in micro-companies it is driven by cost, management and agency factors. In both groups, the predictors of voluntary full accounts include management and agency factors, and choosing voluntary audit is one of the key factors. The study provides models that can be tested in other jurisdictions to provide evidence of the needs of micro-companies, and the discussion of the methodological challenges for small company researchers in the UK makes further contribution to the literature.

Managerial and policy implications. Management should establish computerised accounting systems that are sufficiently flexible to meet their developing information needs.. Those advising small companies on financial management should be wary of using a large company model to prescribe best practice, but rather to encourage practices to develop on a contingency basis.. Members of the accounting profession responsible for the auditing and/or preparation of accounts should encourage practices based on management's need for financial information.. Qualitative research should be conducted to gain insights into how and when different types of financial information are used and what further information could be provided that would be useful to management.