In many economic settings, gatekeepers play a central role. For example, auditors verify public firms’ financial statements, lawyers sign off on transactions by providing legal opinions, and bank regulators assess whether banks are financially sound. Gatekeepers influence the behavior of those they oversee (“the gated”) through the ability to withhold support, and they are expected to guide the gated toward better decisions. Yet, a defining feature of gatekeepers is that they lack direct control: They cannot dictate what the gated should do.

What gatekeepers can do is communicate, often possessing expertise that is valuable to the gated’s decisions. However, gatekeepers face a communication dilemma. If a gatekeeper reveals too much, the gated may game the standard rather than change their behavior. Yet saying too little wastes the expertise and fails to guide the gated. How, then, can gatekeepers effectively influence behavior?

In a new paper, I study this question through a model of an expert with veto power – a “gatekeeping expert.” The gatekeeper privately knows what the gated should do, and the paper studies how the gatekeeper can communicate her knowledge to the gated. I show that strategic vagueness is key: By being deliberately vague, the gatekeeper can guide without being gamed.

The Case of Auditing

I focus on auditors, a quintessential example of a gatekeeper. In my model, an auditor – the gatekeeping expert – decides whether to accept the manager’s report. The auditor has accounting expertise: She knows what the appropriate report is and wants the manager’s report to be close to her standard. In contrast, the manager wants to maximize the reported number for revenue and other indicators of financial performance. Without guidance, he may gamble on inflating the numbers and offer a report that the auditor is unlikely to accept. The auditor would like to communicate her knowledge but if she simply tells the manager how to conform the report to her standards, he might use that information to inflate the reported numbers to the limit she will accept; the manager games the auditor. This is the gatekeeping expert’s dilemma.

Strategic Vagueness

I show that vague communication resolves this dilemma. Instead of revealing the auditor’s preferred report, the auditor divides the range of possible values into intervals and tells the manager only that the preferred report lies within a particular interval. This vague communication steers the manager toward a report closer to the auditor’s view without revealing the upper bound of what she will accept. An important feature of the equilibrium communication is maximal acceptance: the auditor communicates enough information to make sure that the manager’s report is always acceptable. Empirically, auditors accept over 99 percent of public companies’ financial statements. My model suggests that such high acceptance rates may partly reflect auditors’ use of vague language in negotiations with managers.

Gatekeeper Independence and Communication

The paper goes on to examine how the auditor’s independence – the cost she incurs when rejecting a report – affects communication. One might expect that strongly independent auditors, who tolerate smaller deviations, would provide more guidance. But I find a subtle trade‑off. When the manager has a powerful incentive to gamble, a strongly independent auditor may actually provide less information. On the one hand, such an auditor tolerates a narrower margin of error, so she must communicate more information to ensure that the manager’s report is acceptable. On the other hand, the manager’s reporting behavior also changes: Since the auditor has a tighter criterion for what’s acceptable, he now has a weaker incentive to gamble on an inflated report. When this incentive dominates, the auditor can afford to be vaguer while still prompting acceptable reports.

Policy Implications and Broader Applications

These insights have implications for regulation. Post-Enron reforms, such as the Sarbanes–Oxley Act, aimed to strengthen auditor independence. Beyond auditing, many argue that gatekeepers more broadly should remain independent. But my results caution that increasing independence may dampen communication between gatekeepers and the gated.

My paper’s framework applies to settings beyond financial auditing. In bank stress tests, regulators must decide how much to communicate about the tests to banks: Being too transparent could prompt banks to game the tests rather than improve their risk management, whereas being opaque fails to communicate the regulators’ expertise and expectations. Similar dilemmas arise in environmental regulation, capital budgeting, and patent examination. Strategic vagueness offers a way to understand how gatekeepers can influence agents’ behavior across these contexts.

Conclusion

My research sheds light on a fundamental communication problem faced by gatekeepers, a unique institution characterized by veto power without direct control. The paper offers a theory of influence not through command, but through the strategic use of vagueness. By showing how gatekeepers can influence behavior despite limited control and the inherent fragility of communication, the paper advances our understanding of why gatekeepers remain prevalent in many economic settings.

This post comes to us from Shunsuke Matsuno at Columbia Business School. It is based on his recent paper, “The Gatekeeping Expert’s Dilemma,” available here.