The directors’and officers’(D&O)liability insurance will lead to a significant increase of audit fees，which may be the result of supervisory effect，incentive effect or opportunistic behavior，and it is of great significance to find out exactly what causes the increase of audit fees.Based on the data of Chinese listed companies from 2003 to 2017，the paper empirically tested the relationship between D&O and audit fees.The study found that D&O would significantly increase the audit fees，and the increased audit fees was caused by insurers’pursuit of higher audit quality because of their active supervision behavior，not by opportunistic behavior caused by D&O.Further research found that there was a significant positive interaction influence between D&O and audit fees，which showed that supervisory and incentive function of D&O was more significant in poor external governance environment.The study provided a new understanding of the relationship between D&O and audit fees，and also provided empirical support for the promotion of D&O.