Abstract This study examines how audit fees and corporate governance index inclusion influence earnings quality among 15 listed Nigerian banks from 2014–2023, using 120 bank-year observations. Panel regression results reveal that a 1% increase in audit fees reduces discretionary accruals by approximately 0.03 points (p < 0.05), signalling improved earnings quality. Membership in the NGX Corporate Governance Index is associated with a 0.05 reduction in discretionary accruals (p < 0.01), even after controlling for audit fees, firm size, and profitability. Interestingly, bank size negatively correlates with earnings quality, with larger banks reporting higher discretionary accruals despite stronger audit scrutiny. These findings affirm that both audit effort and governance transparency independently enhance reporting discipline, consistent with agency and signalling theory. The study concludes that robust corporate governance benchmarking and well-priced audit services reduce opportunistic financial reporting, though supervisory intervention is needed for larger institutions. Recommendations include expanding governance index participation, protecting auditor independence, and addressing size-related governance anomalies.
ACHU FELIX ADIE1* , EJOH, NDIFON OJONG2 (Sun,) studied this question.