This study examines whether firms have higher pay-performance sensitivity of executive compensation when audited by an industry specialist. Using a sample of publicly-traded Taiwanese companies during 2005-2010, this study finds that there is a significantly positive association between auditor industry specialization and pay-sensitivity of accounting performance. The results hold for both firm-level industry specialist and partner-level industry specialist. The findings are consistent with the optimal contracting theory that the board of directors increases the pay-performance sensitivity of executive compensation when the accounting-based measure is of higher quality due to higher auditor industry expertise.