The purpose of this paper is to examine whether and how audit quality relates to cost of capital. Using a
sample of 415 firm-year observations from 2006 to 2010 and after controlling for the effect of exogenous
variables, the findings indicate that Auditor size is associated with a decreased cost of capital. Also, the
length of the audit-client relationship is negatively and significantly related to the cost of capital. However,
contrary to expectation, we fail to find a significant association between Auditor industry specialization and
firm’s cost of capital. Overall the results suggest that both the Auditor size and tenure are effective in
alleviating the cost of capital for Iranian listed firms.
کلید واژگان :
Auditor Size, Auditor Industry Specializatio, Audit Firm Tenure, Cost of Capital.
