Model Trade Book Contract

20.

Author’s Right to an Audit.

Author, or Author's representative, has the right, upon reasonable notice to Publisher and during regular business hours, to examine Publisher's books and records relating to sales of the Work. Such examination will be at Author's expense unless errors in accounting to the disadvantage of Author amounting to 5% or more of the royalties paid to Author are found, in which case Publisher must reimburse Author for Author's actual costs of such examination, as well as the royalties owed.

Commentary

Most publishers' standard contracts contain an audit clause similar to Section 20 of the Model Contract; if your contract does not, it is very important to add this clause as this is the only provision that allows you to double check your publisher's accounting. Take care to ensure that the audit clause allows you and/or your representative to conduct the examination, and that it does not limit who your representative may be (e.g., you shouldn't be required to use a CPA or be prevented from using someone on a contingency basis). Such limitations are designed to make it hard for you to retain a qualified examiner. The obligation of the publisher to pay the examiner's fee if it erred in calculating your royalties by more than 5% is typical, although some standard contracts place a 10% error requirement. You should try to decrease this requirement to 5%. Finally, try not to let the publisher limit the time you have to examine the records for a given accounting period. You should be able to detect and object to a discrepancy on your statement for as long as the discrepancy exists, or at least as long as the statute of limitations allows. If the publisher insists on a time limit, try to increase the amount of time you are allotted to challenge any royalty statement.

 

The Authors Guild recommends that you exercise your right to an audit strategically—for instance, if you have reason to suspect that your payments are low as compared to known sales. Mistakes can happen and audits of the publisher's accounts are a good way to catch them, but audits can be expensive, so assert the right only as needed.