We study the costs and benefits to the issuer of engaging an initial public offering (IPO) auditor specialist. We measure IPO auditor specialization and then find that IPO specialist auditors earn significant fee premiums relative to IPO auditors without specialization and that clients with an IPO specialist auditor exhibit lower levels of underpricing relative to clients without an IPO specialist auditor. We also demonstrate that IPO specialist auditors provide higher quality audits than IPO auditors without IPO audit specialization, finding that their IPO clients have a lower likelihood of financial misstatement and have lower discretionary accruals. Collectively, our results have important implications for the auditing profession and capital markets because we demonstrate empirical evidence of the costs and benefits of engaging IPO specialist auditors.

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