Below is an example of an audit provision that is rather poor for a songwriter, and quite favorable to a music publisher:
(a) Audit Rights:
You are entitled, at your own expense, to appoint a certified public accountant (“CPA”) to review and copy relevant sections of the sales records directly tied to the exploitation of the Works (a “Royalty Audit”). If you decide to perform a Royalty Audit, the following rules apply:
1 - Notification Requirement: You must provide written notification of your intention to conduct a Royalty Audit (“Audit Notice”) for specific royalty statements within one (1) year of receiving those statements from the Counterparty, as stipulated in this Agreement. Upon receipt of your Audit Notice, the Counterparty will arrange for the commencement of the Royalty Audit.
2 - Auditor Eligibility and Confidentiality: The Royalty Audit must be conducted by a CPA who, prior to starting the audit, must sign the Counterparty's standard confidentiality agreement. Your CPA is prohibited from conducting the audit if they or their firm are already auditing the Counterparty's records for another client, unless that audit has concluded. However, if the Counterparty informs you that your chosen CPA is engaged in another audit (“Other Audit”), you may still use the same CPA, provided the following conditions are met:
(i) You notify the Counterparty within 30 days of receiving notice about the CPA’s involvement in the Other Audit.
(ii)The CPA completes the Other Audit promptly and delivers the final report to their client and the Counterparty
(iii) Your Royalty Audit begins within 45 days after the Other Audit’s final report and proceeds without undue delay.
3 - Scope of Review: Neither you nor your CPA may examine records unrelated to the exploitation of the Works. The Audit Notice and corresponding Royalty Audit may only address royalty statements issued within the three years preceding your Audit Notice. Additionally, each royalty statement may be audited only once.
4 - Audit Timing and Location: The Royalty Audit must occur during the Counterparty’s regular business hours and at the location where the relevant records are stored, currently XXXXXXXXXXXXXX, XXXXXXXXXXXXXXXXXXX.
5 - Duration and Reporting: Fieldwork for the Royalty Audit must be completed within 60 days of its start. Any disputes regarding the royalty statement (“Audit Report”) must be submitted in writing to the Counterparty within 60 days of completing the audit.
(b) Notice of Objection:
If you elect to challenge or assert a claim related to a royalty statement, you must provide the Counterparty with a detailed written objection to the statement, including the specific reasons for your objection, within one (1) year of receiving the statement.
(c) Statements Are Binding:
Regardless of whether you conduct a Royalty Audit or file an objection under section 11.14(b), all royalty statements will become final and binding one (1) year after they are issued. After this period, you forfeit the right to dispute or make claims related to those statements.
(d) Waiver for Non-Compliance:
Failure to strictly comply with the procedures outlined in sections 11.14(a) or 11.14(b) will result in the forfeiture of your right to dispute or challenge the relevant royalty statement or make any claims related to it.
Beyond providing royalty audit services, my firm Boschan Corp. provides consulting services where we redline (i.e., suggest changes to) various entertainment and licensing agreements for our clients' legal counsel to consider in contract negotiations. Please call us today for deep niche expertise in music agreement provisions and definitions. (424) 248-8866
