A self-interested expert obtains evidence and takes actions on behalf of many clients. Afterward, the expert justifies these actions to an auditor who has limited expertise. The auditor verifies that the expert's justification is consistent with the evidence and that the actions were in the clients' best interest. We explore how this ex-post scrutiny disciplines the expert. The constraint of justifying actions to an auditor, even an auditor with little expertise, can force the expert to act in the best interest of all clients under certain conditions. When these conditions do not hold, the expert devises a justification that makes the expert's selfish actions appear clientoptimal. In this justification, the expert inflates the strength of weak evidence and deflates the strength of strong evidence. Moreover, an increase in the auditor's expertise can reduce clients' aggregate payoff.
A self-interested expert obtains evidence and takes actions on behalf of many clients. Afterward, the expert justifies these actions to an auditor who has limited expertise. The auditor verifies that the expert's justification is consistent with the evidence and that the actions were in the clients' best interest. We explore how this ex-post scrutiny disciplines the expert. The constraint of justifying actions to an auditor, even an auditor with little expertise, can force the expert to act in the best interest of all clients under certain conditions. When these conditions do not hold, the expert devises a justification that makes the expert's selfish actions appear clientoptimal. In this justification, the expert inflates the strength of weak evidence and deflates the strength of strong evidence. Moreover, an increase in the auditor's expertise can reduce clients' aggregate payoff.
