Crash Course Part II: Tips and Common Mistakes to Avoid

Prior to actually auditing books/records, there are important steps to ensure a successful audit. This section of the Crash Course will highlight some common mistakes to avoid as well as tips to prevent creating obstacles to a smooth audit process.

  1. Don’t let the auditor sign an NDA that prevents the auditor from disclosing relevant information to the client, the representative, or to a judge and jury during litigation. If an auditee (e.g., studio) stipulates in its NDA that confidential information may only be disclosed to:

“a) Auditor and employees of the Auditor…b) Participant and its directors, officers, employees, accountants, attorneys, and talent agents in their capacities as such and subject to terms of this Confidentiality Agreement,”

then it would be wise to add the following clause:

“c) Judges, courts, and the like if any legal proceedings arise in connection with the audit.”

  1. Watch out for the auditee’s tolling “tricks” and poor tolling language. For example, tolling through the date of fieldwork commencement may indicate that once fieldwork commences, the tolled rights are all lost.

  2. Remove restrictive language requiring the auditor to be a “nationally recognized CPA firm.” This will eliminate the auditee’s ability to deny the client the right to audit for this reason.

  3. Avoid failure to monitor, make review constant, and be proactive to make sure that someone regularly reviews statements and compares them to agreement terms—even if the statements are unrecouped.

  4. Be mindful that communications with an “independent auditor” might be discoverable and not privileged information.

  5. When choosing an auditor to add to your team, select someone who is a CPA because CPAs must adhere to certain codes of professional conduct and standards.

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Phone: 310-556-7745 • Fax: 310-388-8494 • Email: General@RoyaltyAuditors.com

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