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Professional Services

Royalty Audit

A Royalty Audit is greatly different to  a financial statement audit.  Financial statement audits focus on thresholds deemed relevant to the acceptable accuracy of overall financial statements.  These statements are often used to compare with other companies for purposes such as stock trading.  Royalty Audits, however, identify real (earned) money the company should be receiving or paying.

Why do a Royalty Audit?

Auditors make sure that the licensee is accurately recording all payments, keeping up with payments, keeping an accurate record of said payments and, in addition, complying with the licensing agreement made by both parties.  This type of practice has been shown to improve license management, while driving increasing profits, resulting in greater protection, helping to form stronger relationships between licensors and licensees.

Intellectual assets grew from 15% to 85% of the corporate market cap between 1971 and 2006.  By 2006, licensing revenues had grown to over $500 billion with 80%-90% of licensees reporting royalties incorrectly and with underpayments ranging from 10%-25%.  The licensee is less likely to under-report royalties if a risk of audit exists. Also, the licensee may want to offer a comfortable position to a licensor by having an audit. This type of comfort is afforded to the licensor by knowing that their licensee is compliant with all of the terms in the licensing agreement and in accurately recording their licensee payments.

LehmanBrown’s high standards and level of skill allow us to offer royalty auditing that is consistent with what is needed for such a task.  These skills include, but are not limited to, reviewing minimum guarantees to verify accuracy, securing and reviewing accounting records including sales data, royalties, inventory,   prior audit reports, etc.

To make an enquiry concerning LehmanBrown Royalty Audit Services, please contact enquiries@lehmanbrown.com

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