Financial Reporting Quality of Financial Institutions in Ghana: To what extent do IFRS Adoption, Audit Quality, and Audit Fees matter?

This study examines how IFRS adoption, audit quality, and audit fees affect financial reporting quality in Ghana using a sample of 52 financial institutions (24 banks; 28 insurance companies) over 12 years, 2003-2014. A logit estimation procedure was used to analyse panel data at the sub-sector level (banks only and insurance firms only) and industry-wide analysis. The results suggest that IFRS adoption reduced financial reporting quality for banks, just as it did for insurance companies. However, for the full-sample modelling, the results reveal an increase in earnings management using loss avoidance (LA) and just-meeting or beating-prior-year earnings (JMBE). Audit quality does not significantly influence reporting quality. The results further revealed that higher audit fees are associated with higher reporting quality for banks and insurance companies at the sub-sector level. This study’s results have significant implications for policymakers and regulatory bodies in Ghana and other developing countries.