This paper examines the association between the employment of industry specialist auditors and the cost of debt of a client company. Unlike auditors without industry expertise, auditors with industry expertise can better improve the credibility of financial statements (Krishnan 2003; Balsam et al. 2003) and verify management's forecasts, thereby minimizing managements' discretion in applying accounting principles and standards (Kwon 1996). This suggests that industry specialist auditors can enhance audit quality. Consequently, clients of industry specialist auditors are expected to achieve more significant economic benefits than clients of nonspecialist auditors. It is hypothesized in this study that clients of industry specialist auditors are more likely to enjoy a lower cost of debt than clients of nonindustry specialist auditors. In addition, this study hypothesizes that the marginal economic value added by auditor industry specialization varies between financially troubled clients and financially healthy clients that seek external financing. The results indicate that clients hiring specialists enjoy better credit rating and lower cost of debt than clients of nonspecialists, and this economic value is more significant for risky firms than for healthy firms. However, these findings do not hold for each proxy of auditor industry specialization.