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ARTICLE · 06 MARCH 2017

Top 10 Tips – Contractual Audits

Reed Smith
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Audit provisions are very commonly found in commercial contracts, especially those which involve payment of a licence fee or royalty.

GlobalAccounting and Audit
Carolyn Pepper
Carolyn Pepper
Matthew Kane
Matthew Kane
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Audit provisions are very commonly found in commercial contracts, especially those which involve payment of a licence fee or royalty. They are often not the clauses which attract the most attention during contract negotiations. However, they are important clauses which warrant careful consideration. Here are our top 10 tips on contractual audits.

  1. Make sure that the purpose of the audit is clearly defined so that both parties understand what the audit is intended to achieve.
  2. Ensure that it is clear whether it is a single company or an entire group that is open to audit.
  3. Agree what information should be available for the audit and ensure that the information which can be inspected is sufficient to assess compliance with the agreement but not so wide that irrelevant information is available for inspection. The parties should consider whether specific exceptions to the documents that can be audited are required.

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