4.19.2006

Audit Clauses

What's an audit clause, and why is it important?


An audits rights clause looks like this:

Author shall have the right, upon reasonable notice and during usual business hours but not more than once each year, to engage a certified public accountant to examine the books and records of Publisher relating to the Work at the place where such records are regularly maintained.

This means that if you think you're not getting paid correctly your CPA can go in and audit the publisher's books.

There is a company here in NYC whose sole purpose is auditing royalty statements. They don't charge you any money, they take a percentage of what they earn for you in mis-paid royalties. They've been doing quite nicely for a number of years, which says a lot about royalty accounting.

An audit clause is important because without it you have to sue to get to the books, and while publishers will probably let you at them if they aren't trying to cheat you on purpose, you definatly want it spelled out that you have the RIGHT to look at them without resorting to litigation.

The language on this clause is drawn from Kirsh's Guide to the Book Contract, a tattered copy of which is in every single agent's office in the world I think.

8 comments:

Christopher said...

I learn something new every day. Excellent. Thanks!

Anonymous said...

Is there a chance that taking advantage of the royalty clause could piss the publisher off? Showing that you don't trust them. I understand that if they aren't giving you all your royalties you wouldn't want to work with them. But what if there were no errors - couldn't that just hurt future chances of book sales? Seems like a lose-lose situation.

stay_c said...

My day job is auditing freight bills (think UPS or Con-way). Audits have changed bread and butter to cake and ice cream for people.

Mad Scientist Matt said...

For why it's important, you might want to take a look at part of the PublishAmerica rip-off. Their contract is notorious for looking reasonable to someone unfamiliar with publishing contracts. It gives the author, but not the author's accountant, the right to examine the books. They've actually told authors who have good reason to believe they've been stiffed on their royalties that they are not allowed to bring an accountant to help audit things.

Maria said...

This book is an excellent, excellent read for any aspiring author--it gives you a very real look at what you can expect in royalties, what to expect in a contract, just flat out how some of the interactions between agents, publishers and authors work. It's a real eye opener for anyone that thinks authors get huge royalties. It also sets good expectations for agent/author contracts.

SherryD said...

Yanno, that sounds a little worrisome - to think a company can make a good living by finding out where some poor writer has been cheated. Maybe not always cheated, but underpaid.

HawkOwl said...

Now THAT is good to know. Thanks!

Anonymous said...

Ah...that is eye-opening.
Makes me wonder who 'audits' the publishers to make sure all books sold are accounted for?