The cost of capital is the least rate of return that a company for satisfying its investors, should achieve that rate. This study aims to examine the effect of audit quality on reducing capital cost. For this purpose, three indicators for audit quality are used: auditor size, auditor specialization in an industry, and auditor tenure. The research uses 69 listed companies’ data in Tehran stock exchange during 2002-2010. For analysis this data, multivariate regression models have been applied. The results indicate that the auditor size, and the auditor specialization in an industry don't have any significant effect on capital cost reduction, but an increase in the auditor tenure reduces the company capital cost.