This research investigates the relationship of auditor size and tenure characteristics with investors expected rate of return. Gordon Model is used to measure investors expected rate of return (cost of equity). The utilized data have been extracted from the listed companies on Tehran Stock Exchange (TSE) over the years 2005-2009. To analyze the data and to test the hypotheses, the multivariate regression model and Data Panel have been employed. The obtained results from the test of research hypotheses indicate a positive and significant relationship between audit firm size and investors expected rate of return. In addition, the findings indicate a negative relationship between auditor tenure and investors expected rate of return but this relationship was not statistically significant
