Royalty Audits

Owners of Intellectual Property, Copyrights and Trademarks, are continually faced with the risk that licensees are not adhering to the terms of contractual agreements and are not paying the full amount due. As a result, Royalty Audits can result in the identification of underpaid royalties.
RSM Bird Cameron’s team of Royalty Audit professionals are dedicated to protecting the owners of Intellectual Property, Trademarks and Copyrights from being taken advantage of in this competitive environment.

Royalty Audits Focus Areas

Royalty Audits are a key control to ensure a licensee is complying with the licence agreement. This includes compliance with royalty payments, conduct of research, achievement of milestones, and advertising or other clauses that can be tested by an independent party. It is good business practice for licensors to conduct Royalty Audits, as the rewards of doing so frequently exceed the cost.

In RSM Bird Cameron’s experience, underpaid royalties have in most cases been attributed to:

• Non-allowable deductions taken by the licensee

• Below market transfer pricing to affiliates

• Mathematical errors and incorrect royalty calculations

• Misinterpretation of the licence agreement

• Omission of sales of new products developed utilising the licensed technology

• Intentional understatement.

Monitoring Process Reviews

As a pre-emptive measure, where a licence agreement has recently been executed, RSM Bird Cameron can also provide professional advice on royalty monitoring systems. We can conduct reviews of the current systems in place to determine if:

• There are adequate procedures and controls for monitoring royalty payments and compliance by licensees 
• Key personnel are aware of the "red flag" error indicators, that require close monitoring and in some cases further investigation with the licensee 
• Royalty report data received is in the format detailed and mandated by the terms of the licence agreement 
• There is a risk that a licensee is misreporting and not complying with the licence agreement.

With a review of current internal royalty monitoring systems RSM Bird Cameron provides an assessment based on best practice and identifies the level of risk exposure.

Download the Royalty Audits flyer.