Royalties Auditing

It seldom happens that an artist uses his/hers contractual audit right. The reason often is the fear of troubling the working relation with the record company. However, mistakes are made and using your audit right is not an accusation. The rights to audit also expire in time; this is regulated by law and is only mentioned in a contract if the record company decides that the length of the legal period is too much of a risk.

Another reason not to use this audit right is accompanying costs. An official audit demands many hours of prep work both from a royalty specialist and an entertainment lawyer. This is true, but you only decide to audit when you have a reasonable suspicion that errors are made, errors which can be spotted in your statements by a royalty manager. Often it is contractually arranged that the record company will bear the total audit costs once a difference of 5% is established to the detriment of the artist between the audit findings and the actual statements. If there is reason to believe that the record company has made structural errors then there is also a possibility to share the costs with other artists of that label. Depending on the number of statements and the period to audit the costs of verifying your statements are surprisingly affordable.