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No. 19Financial Terms
Also called right to audit, royalty audit, inspection rights, accounting examination
Your right to inspect the label's financial records to verify royalty calculations are correct.
Artist-friendly
Audit rights protect the artist; their absence is a red flag.
Audit rights give the artist (or their accountant) the ability to examine the label's books and records relating to the recordings, to verify that royalty statements are accurate. Without this right, you are entirely dependent on the label's own calculations. Industry studies consistently find that audits recover significant underpayments.
Royalty accounting errors, intentional or not, are extremely common. A right to audit is the only mechanism to catch and recover underpayments. Many artists only discover discrepancies years after the fact when cumulative errors are substantial.
The same clause is drafted three ways. These are the positions we see, worst first, so you can tell at a glance which one is in front of you.
The drafting language and the negotiation moves for this clause are part of the workspace.
You have read what the clause means and where the risk sits. The rest is the side-by-side of how it reads when it is against you and when it is not, plus the specific moves that get it there.