Sunday, November 30, 2014

The Royalty Audit: A Legal & Financial Concern

A “royalty audit” is more accurately described as a contract compliance examination, or a "contract audit." Thus, in four of five cases, the call to do a contract audit is made by a client's attorney, not its finance team.

Even in the infrequent cases when the call comes from a non-attorney, we like to involve an attorney if the client is willing to pay for it because we usually need a tolling agreement and our contract audits basically seek to quantify amounts due in connection with legal issues, so it helps to have an attorney available to consult as matters arise and in order to facilitate a settlement agreement or, rarely, file a legal complaint. Accordingly, our royalty and other contract audit work is actually expert consulting work that is a subset of our “forensic accounting” practice, all of which is for a legal purpose.

On the other hand, some attorneys see us as pure bean counters and if a client’s motivation for auditing a business partner is purely financial and it isn’t interested in paying us or an attorney to identify all breaches of the contract, just the accounting provisions, our work focuses as much as possible solely on the financial aspects of their contract.

Even in this case, a contract audit is unlike a financial audit that audits compliance with GAAP (aka an “assurance audit”), which Green Hasson Janks also performs.

One fundamental difference between an “assurance audit” and the contract audits we do: the client.  For example, if we perform a financial audit of a game publisher, the game publisher is our client. If we perform a contract audit of a game publisher, our client is typically a developer or other creator or licensor, not the game publisher, and the publisher is a counterparty to whom we are adverse.

#Thanksgiving Weekend Edition

The top items I shared last week among my Linkedin and Twitter followers:

Buffy Sainte-Marie said #NO:


"Elvis just recorded your song and we want some of that publishing $, honey."






#Giveback: holiday shopping on YouHambo


News from The Wall Street Journal:




***Litigation Update*** "...contracts will keep Run DMC's now-indigent lyricist in hot water over his lawsuit for royalties, a... judge ruled." - Courthouse News Service


Other Links of Interest:



Fresh #Gifts: #Travel #Journey #Fair #Trade


From http://jezebel.com/

# # #

For more music news, follow me @Auditrix.  For interactive games and other IP royalty, business and litigation news, you should follow me @RoyaltyExpert.