Royalty Compliance Audit

Royalty audits are an effective and contractual way for Licensors or assigned Agents to enhance their bottom line by collecting royalties due but unpaid. Not only is this a prudent business practice, but it will also increase shareholder value and protect the value of the brand or property licensed to the Licensee. In many instances the ‘right to audit’ provision in the licensing agreement will enable the Licensor or Agent to fully recover the expenses incurred. Our experience has been that the recovery of our fees can range from 200% to more than 1200% of the fees charged.

The benefit of using MKA instead of in-house personnel is that we are independent of the parties to the Licensing Agreement, Licensed Certified Public Accountants governed by the AICPA and State Board of Accountancy and should a conflict arise, MKA is not viewed as an extension of the Licensor.

The MKA Advantage

In the lucrative field of licensing, it is always in the best interest of the Licensor to ensure that its Licensee complies with the reporting and financial terms of the licensing agreement. MKA’s seasoned team of Licensing & Royalty experts perform an in-depth analysis of the reporting practices of the Licensee to determine that the revenue generated from the Licensor’s intellectual property is in compliance with the licensing agreement and that the Licensor has received the royalties they are entitled to.

MKA has extensive experience with Licensees in all segments of the consumer industry including toys, sports, entertainment, apparel, electronics, food and beverage. We understand the importance of your relationship with your Licensee. During the course of our engagements, our professionals stay in contact with you, communicate the findings and, in most instances, report significant sums of previously unreported royalty income. In addition if so requested, our professionals may also recommend internal controls and monitoring procedures to strengthen the Licensor’s internal review of royalty reporting by Licensees.

Royalty audits, in the context of licensing, are typically an attest function. MKA works with the Licensor to develop, for the Licensor’s approval, Agreed-Upon Procedures (AUPs) which are performed by MKA’s field auditors. The AUPs form the basis for the engagement and reporting of findings by MKA. Our clients may also choose to engage MKA for consulting services, which are not an attest function.

Your own Certified Public Accountant may audit your company’s financial statements; however, the audit does not focus on whether you are receiving all of the licensing income due you. Our services typically do not compete with an entity’s CPA. Rather, we focus on visiting the source of royalty payments, i.e. at the Licensee’s location, in order to perform the agreed-upon procedures.

Through our independent membership in Baker Tilly International, MKA can service clients through close to 145 member firms in over 100 countries.

For additional information: contact us