Royalty Audit

Almost every licence, franchise and distribution agreement contains an audit clause, and almost nobody uses it. Licensors rely on self-reported statements from the very party with an incentive to understate — and industry experience is consistent: a substantial share of royalty statements contain errors, and the errors run overwhelmingly in the licensee's favour. Unexercised audit rights are unclaimed revenue.

Acumon performs royalty examinations for licensors, franchisors and rights holders: reconstructing what should have been reported from the licensee's own records, quantifying shortfalls, and reporting in a form that supports recovery — commercially where possible, formally where necessary.

Where Royalty Leakage Comes From

Deliberate understatement is the rare case. Most shortfalls are structural: sales channels or territories omitted from the royalty base, deductions taken that the agreement does not permit, bundled products allocated to unlicensed components, exchange rates applied inconsistently, sublicensee revenue never reaching the statement, and minimum guarantees or escalators simply miscalculated. None of it is visible from the statement itself — which is precisely why agreements contain audit clauses.

What a Royalty Examination Involves

We start from the agreement, not the statement: what does the royalty base actually include, what deductions are permitted, what rates and thresholds apply. Then we test the licensee's own records — sales ledgers, system reports, sublicence agreements — against that contractual definition, reconstructing the royalty independently and reconciling it to what was reported. The difference, documented line by line, is the finding.

For Licensors, Franchisors and Rights Holders

The same discipline serves brand licensors checking manufacturers and distributors, franchisors verifying turnover-based fees, IP owners with technology and patent licences, and publishers and media rights holders reviewing royalty streams. It also serves licensees: if you are on the receiving end of a royalty audit, or want confidence in your own reporting before renewal negotiations, we perform the review from your side of the table.

Recovery Without Destroying the Relationship

Most licence relationships are worth keeping, and most findings are settled commercially once the evidence is clear. Our reports are written for that use: factual, tied to the agreement's wording, and quantified — the basis for a correction and improved reporting going forward, not an opening shot in litigation. Where a dispute does escalate, the examination is already documented to a standard that supports formal proceedings, and our forensic specialists carry it forward.

Making Audit Clauses Worth Having

We also advise before the ink dries: audit clauses that specify records access, cost-shifting where underreporting exceeds a threshold, and clear royalty-base definitions turn a future examination from an argument into a procedure. If you are drafting or renewing licence agreements, an hour of input now is worth more than a week of ambiguity later.

What You Get With Acumon

• Royalty examinations under the audit clauses of licence and franchise agreements
• Independent reconstruction of the royalty base from the licensee's own records
• Underpayment quantification, documented line by line against the agreement
• Sublicensee, multi-territory and multi-currency royalty streams traced
• Reports written to support commercial settlement — and litigation if needed
• Licensee-side reviews: defend an audit or verify your own reporting
• Advice on audit clause drafting and royalty-base definitions
• Forensic escalation in-house where findings indicate deliberate understatement

Why Acumon for Royalty Audit?

• ICAEW-registered and FRC-authorised audit firm
• Forensic audit and anti-fraud capability in-house for contested findings
• Team of 70 audit professionals, more than half from leading international accounting firms
• ERP and data experience: SAP, Oracle, Microsoft Dynamics, Sage — royalty data extracted and tested at population level with Inflo analytics

Get a Fixed-Fee Quote

Tell us what you need and we'll come back within one business day with a clear scope and a fixed price — no hourly-rate surprises. Call 020 8567 3451 or use the form and we'll be in touch.