No Audit Right Or Audit Window Is Too Short - Traps & Scams Every Musician Must Avoid

You signed a deal. You trusted a company. Then you got paid like a part time busker at 2 a m on a Tuesday. Welcome to the thrilling, soul crushing world of audit rights in music contracts. If your contract says you have no audit right or the audit window is ridiculously short, your royalties can vanish into thin air like the last slice of pizza at band practice. This guide tells you why audit rights matter, how labels and publishers use tiny audit windows to bury underpayments, and what you can do about it right now.

Everything here is written for busy artists who want to keep their money and sanity. We will explain legal jargon without sounding like a law professor, give real life scenarios you will recognize, and hand you exact language and checklists to use in negotiations. Read this before you sign anything. Or read it after. Either way do not act surprised when you find out you are owed money.

What Is An Audit Right And Why Does It Matter

An audit right is the contractual ability to inspect the books and records of whoever pays you. That could be a record label, a music publisher, a digital distributor, an admin company, or a collection society. Audit rights let you or an independent accountant look at the accounting to confirm the company paid you everything it owed.

Think of it like checking your bank statement after someone else manages your money. You would be mad if your landlord kept interest earned on your security deposit without telling you. An audit right gives you a similar power to check the math and the receipts behind your music income.

Common terms explained

• Audit window is the period during which you can request an audit for past accounting periods. If your audit window is 18 months you can only ask to audit payments from the last 18 months.
• Recoupment refers to the process where the company recovers advances and expenses from your future earnings. It is not theft but it can be abused when expenses are padded or misclassified.
• PRO stands for performance rights organization. These are entities like ASCAP, BMI, or PRS that collect public performance royalties for songwriters and publishers.
• MLC is the Mechanical Licensing Collective. This is the organization in the United States that handles mechanical royalties for interactive streaming from certain sources. Useful but not magical.
• Cross collateralization happens when different revenue streams or deals are pooled together to pay off a single advance or expense. It feels neat for the company and suffocating for you.

Why Companies Try To Kill Your Audit Rights

Money, laziness, and plausible deniability. When a company knows an artist cannot meaningfully audit them they can do things like misreport streams, delay statements, allocate revenue to nonpaying buckets, or charge imaginary admin fees. A short audit window is like a statute of limitations that only protects the company. If they underpay you in Month One and the audit window closes in Month Twelve you cannot go back and force them to show you the books for Month One. Companies love this setup for obvious reasons.

Real life example

• Band signs indie label deal with a 12 month audit window. Streaming spikes at Month Three. Label reports low revenue and pays a tiny check. At Month Fourteen the band sees evidence that the streams were actually huge. Audit window closed. Label kept the money. Band is furious and broke. Everyone drinks at the afterparty anyway but the vibe changes.

Common Audit Clause Traps You Must Watch For

Contracts are a playground for clever wording. Below are the typical traps that will quietly steal your money if you are not careful.

Audit window is absurdly short

Examples you will see

• Six months to review the entire life of the deal.
• Ninety days to inspect annual accounting periods.

Reality check

Accounting for global digital income is messy. Streams, mechanicals, sync, neighbor rights, and performance statements arrive late. Six months is a joke. A reasonable audit window is at least three years from the date of the relevant accounting statement. Five years is better. Ten years is ideal when you expect long tail income.

You must request an audit in writing to their email address only

Why this is a trap

If the company controls the inbox that confirms your audit request they can claim they never received it. Request procedures should allow email, certified mail, and physical delivery with a receipt. Also require notifications to be sent to a specific person in accounting rather than a generic address.

Audit only at their offices during business hours

How this plays out

You are made to fly to their city, show up during their morning coffee ritual, and sit in a tiny room while their accountant schedules your review between snack breaks. That is not an audit. It is a performance. Insist on remote access to documents, copies of electronic records, and the ability to inspect records in your city if needed.

Audit allowed only by the company approved accountant

Red flag

If the contract says your audit must be performed by an accountant approved by the company then guess whose cousin gets hired. Your audit should be done by an independent certified public accountant of your choosing. If the company wants to add a condition to ensure the auditor is licensed in the jurisdiction specify reasonable professional qualifications and disallow any conflict of interest.

Costs always paid by the artist

How it works

Many deals make the artist pay for the audit regardless of the result. That means if you suspect underpayment you must spend money to prove you were underpaid. Negotiate for cost shifting where, if the audit reveals an underpayment beyond a threshold like 5 percent, the company pays the audit costs. If the audit finds trivial discrepancies you cover the cost.

Audit rights terminate if you breach any other provision

The trap

Make sure audit rights are separate from other warranties and do not expire due to unrelated technical breaches. Otherwise the company can manufacture a minor breach and claim you lost audit rights.

Right to inspect books does not include electronic third party records

Why this matters

A lot of modern income passes through third party aggregators and platforms. If your audit right excludes electronic or third party records then you are looking at summary statements while the real data sits on other servers. Your audit clause must include the right to request and receive third party records and account statements like streaming platform reports, distributor statements, and PRO statements.

Real Life Scams And How They Work

Here are schemes labels, publishers, and admin companies actually use. None of them are pretty.

Round down reporting with opaque exchange rates

How it plays

Streams generate money in various currencies. Companies will use exchange rates that favor them. They may round down micro payments and aggregate them into reports that look correct while quietly subtracting small amounts here and there. When the audit window closes the tiny amounts add up to a nice dinner at their CFOs restaurant.

Offshore affiliate shuffle

How it plays

Revenue is routed through an affiliate in a low tax jurisdiction that pays the home office a reduced royalty. The contract allows affiliate accounting. You end up paid on the affiliate split rather than the gross revenue. If the audit window is short you cannot go back and uncover the routing.

Phantom deductions and vague expense categories

How it plays

Your contract allows the company to deduct marketing expenses or special fees. Then they allocate large lumps into mysterious categories. When you ask for details you get a PDF with totals but not receipts. A proper audit right forces production of invoices and vendor contracts.

Off ledgers and manual adjustments

How it plays

Manual adjustments made after the initial statement are never reflected in final statements. Your contract requires the company to provide final statements only. If adjustments were done off ledger they are impossible to prove without an audit that includes internal memos and emails. Tiny audit windows help hide such tweaks.

How To Negotiate Audit Rights Like A Pro

Negotiation is a muscle. You get stronger by practicing. Here are negotiation points that actually work in real life.

Ask for a clear audit window

Suggested language

The Artist shall have the right, at Artist expense, to audit the Companys books and records relating to Artist s account for a period of five years from the date of each royalty statement. If such audit reveals underpayment in excess of five percent of the amounts due for any audited period, Company shall promptly pay the deficiency together with interest at the rate of six percent per annum and shall reimburse the Artist for reasonable costs of the audit.

Why this works

Five years is realistic. The threshold forces companies to fix meaningful errors. The interest rate compels quick payment and discourages stalling.

Prevent narrow notice rules

Suggested language

Notice of audit may be delivered by certified mail, courier with proof of delivery, or email confirmed by delivery receipt to the Company s accounting department and the Company s general counsel. The date of receipt shall govern the commencement of the audit window.

Why this works

Multiple delivery methods prevent the company from pretending it did not receive your request.

Ensure remote access and copies

Suggested language

The Artist s auditor shall have the right to examine copies of Company s books and records electronically or in person. Company shall provide readable copies of all documents reasonably requested by Artist s auditor within thirty days of request. If the physical inspection is required, Company shall make reasonable accommodations to permit inspection at a mutually convenient location.

Limit company control over the auditor

Suggested language

Artist shall select an independent certified public accountant. Company shall not unreasonably withhold consent to such selection. Company may require that the selected auditor possess a current license to practice as a certified public accountant in the jurisdiction where Company maintains its primary accounting records.

Why this works

It prevents the company from installing friendly auditors while allowing reasonable professional standards.

Make cost shifting fair

Suggested language

If the audit reveals an underpayment in excess of five percent of the royalties due for the audited period, Company shall reimburse Artist for reasonable costs of the audit, including reasonable fees for technical experts. If the audit does not reveal such underpayment, Artist shall bear reasonable and documented costs of the audit.

Why this works

A threshold discourages frivolous audits but protects artists who find real underpayments.

Step By Step Audit Process Artists Should Follow

Audits sound scary. They do not have to be. Here is a pragmatic workflow you can use if you suspect underpayment.

1. Collect the triggers. Gather suspicious statements, screenshots of DSP dashboards, emails that hint at play counts, and any social proof like playlist adds. The more you have the better your argument.
2. Do a sanity check. Compare statements against known rates. For example streaming payouts per stream for a major DSP can be ballparked. You will not get exact numbers but you will see if something is obviously wrong.
3. Send a formal audit demand. Use certified mail and email and quote the audit clause. Keep the tone professional. Demand confirmation of receipt.
4. Hire an accountant. If the company fights you, bring in a certified public accountant with music industry experience. They will know where to look for third party reports and manual adjustments.
5. Request third party records. Platforms like Spotify and Apple have reporting for labels and distributors. Ask for those raw reports. Also request distributor level statements and PRO reports.
6. Negotiate a timeline. The company may stall. Put conservative but firm deadlines in writing and reference them in future communications.
7. If you find underpayment. Demand payment with interest and reimbursement of audit costs per your contract. If they refuse, consider mediation, arbitration, or litigation. Many contracts require arbitration. Understand the route before you start.

How To Audit Specific Revenue Types

Streaming royalties

What to request

• Distributor reports showing the streams, territories, and rates charged.
• Platform level statements from Spotify, Apple, Amazon, YouTube, and any regional DSPs.
• Exchange rates and rounding policies used by the company.
• Details on pro rata pools and any deductions applied by the company.

Performance royalties

What to do

Check statements from your local PRO and from foreign PROs through reciprocal statements. Request the company s matched usage reports if they claim to collect on your behalf. Ensure splits reported to PROs match your splits in the contract.

Mechanical and MLC royalties

What to request

Ask for mechanical statements and the data submitted to the MLC when applicable. Confirm compositions are correctly registered and splits match what you expect. Errors in metadata often cost songwriters money for years.

Sync and license fees

What to request

Request license agreements, payment receipts, and invoices for sync fees. Companies sometimes apply a large admin fee or credit back a portion as an expense. Make sure the fee is transparent and supported by a third party invoice.

When To Hire A Forensic Music Accountant

Not every discrepancy requires a full blown forensic audit. But when numbers get weird, hire a pro. Forensic accountants specialize in tracing money through multiple ledgers and platforms. They will pull raw platform exports, match ISRC codes, check ISWC and composer splits, and find anomalies that a general CPA might miss.

Signs you need a forensic accountant

• Large unexplained deductions.
• Inconsistent distributor reports that do not match platform raw data.
• Complex cross border routing of revenue through affiliates.
• Claims that statements are unauditable due to proprietary systems.

Metadata And Splits: Your Silent Money Killers

Incorrect metadata is the single most common source of missing royalties. Metadata includes song title, artist name, composer credits, ISRC, and ISWC. If your song is registered with the wrong split or wrong ISRC then the money will route elsewhere and your audit cannot recover it unless you can show correct registration history.

Real life scenario

A songwriter recorded a feature under a different artist name on a remix. The distribution company registered the ISRC under the wrong artist. Streams poured into a ghost account. Months later the feature was stripped from statements. The songwriter spent thousands untangling metadata and finally recovered partial payment. It took forever and burned relationships. Metadata audits are cheap insurance.

Checklist Before You Sign Any Deal

• Does the contract grant you an audit right that lasts at least five years from the date of each statement?
• Can you use an independent auditor of your choice without company control?
• Do you have remote access to electronic records and third party platform data?
• Are audit costs shifted to the company if underpayment exceeds a reasonable threshold?
• Are there clear notice procedures that include email and certified mail?
• Is the jurisdiction and dispute resolution fair and not designed to bury you in expensive foreign court fights?
• Does the agreement require the company to produce invoices for deductions, expenses, and related party transactions?
• Are metadata ownership and registration responsibilities clearly allocated between parties?

What To Do If The Audit Window Already Closed

All is not lost. Even if the audit window closed you still have options.

Check for misapplied recent payments

Sometimes companies misallocate recent payments to older periods to avoid triggering audits. Scrutinize the most recent statements for reversals or mysterious credits.

Look for breach of fiduciary duty

If the company acted in bad faith or committed fraud you may have a cause of action outside the contract. Statutes of limitation differ by jurisdiction but can be more forgiving for fraud. Talk to a lawyer.

Use public data and social proof

When streaming numbers are verifiable via charts and third party analytics you can use that data to pressure the company. A pointed demand letter from counsel with publicly verifiable streaming data often produces a settlement.

How To Keep Your Records So You Can Fight Like A Boss

Good records are the artist s best weapon. Build a simple system and update it weekly.

• Keep a folder for each release with distributor confirmations, ISRCs, split sheets, and registration confirmations with PROs and the MLC.
• Download and store platform raw reports at least monthly. If a platform only provides quarterly exports download those immediately.
• Keep copies of all emails with companies and any offer memos.
• Record the date you submitted metadata and who you spoke with at the distributor. Human memory is adorable but unreliable.

Sample Email To Demand An Audit

Use this as a template. Save it in your notes app for later. Send it certified mail too.

Subject Line: Formal Audit Demand Pursuant to Section [X] of the Agreement dated [date]

Dear [Accounting Contact],

This is a formal demand pursuant to Section [X] of the Agreement between [Artist or Company Name] and [Company Name] dated [date]. The Artist hereby requests an audit of Company s books and records for the accounting periods ending [dates]. Please confirm receipt and provide dates within thirty days when the requested records will be made available, including raw third party platform reports, distributor reports, invoices for deductions, and all correspondence relating to the accounting for the relevant periods.

As required by the Agreement the Artist will engage an independent certified public accountant to perform the audit. Please advise if you require any specific documentation confirming the auditor s credentials.

Thank you. Please confirm receipt of this notice by return email and by certified mail.

Sincerely,

[Your name and contact info]

What If The Contract Forces Arbitration Or Requires Forum Selection

Many modern contracts make you arbitrate claims. Arbitration can be faster but sometimes favors companies with deeper pockets. If the contract forces arbitration try to negotiate for a neutral forum or a clause that allows the artist to pursue injunctive relief in court for accounting records. That preserves a path to obtain documents quickly when urgency matters.

Technology Tools That Help You Spot Problems Early

Use analytics platforms and public dashboards to monitor your performance. Tools like Chartmetric, Soundcharts, and Spotify for Artists are useful. They do not replace a contract or an audit but they create a breadcrumb trail that you can compare to statements.

Pro tip

Screenshot everything. Platforms change interfaces and policies. Time stamped screenshots and export files are evidence.

FAQ

What is a reasonable audit window for music deals

Reasonable audit windows are three to five years from the date of each royalty statement. Five years is recommended because royalty chains cross borders and statements can be delayed. Ten years sits in the ideal category for long term catalog deals.

Can a company refuse to let me audit third party platform records

No. If your contract gives audit rights they must include relevant third party records that support the accounting. If the clause is silent explicitly request access to platform level reports and distributor exports during negotiation.

What if the contract says my audit costs are always my responsibility

Try to negotiate a cost shifting provision where the company pays reasonable audit costs if the audit reveals underpayment above a reasonable threshold like five percent. If you cannot negotiate that then consider a scaled approach where the company pays costs for follow up audits or for discrepancies beyond the threshold.

How often can I audit

The contract should limit audits to a reasonable frequency to avoid harassment while protecting your rights. Common language allows one audit per calendar year unless material discrepancies are found. Negotiate limits like one audit per year with exceptions if underpayments are discovered.

Can I get interest on unpaid royalties

Yes if your contract includes interest on late payments. If it does not, negotiation can include interest at a specific rate or statutory interest. Interest encourages timely correction. Many artists push for six percent annually or the statutory rate in the governing law.

What counts as an underpayment

An underpayment is any amount you are owed that the company did not pay. This includes wrong currency conversions, incorrect splits, misallocated streams, improper deductions, or failure to remit third party collections. The burden of proof shifts depending on your contract and the records available.

How do I audit metadata and splits

Request all registration records submitted to distributors, PROs, and the MLC. Compare them against your own registration confirmations and split agreements. ISRC and ISWC codes are crucial identifiers. A mismatch in these codes often reveals where royalties went wrong.

Can I audit my publisher or administrator

Yes if your publishing agreement contains audit rights. Admin deals sometimes limit audits or add restrictive procedures. Negotiate for clear language that allows you to inspect global income streams and third party reports.

Does a distributor have to share raw platform reports

If the distributor is responsible for accounting it should provide raw platform reports. Some distributors try to hide behind summary statements. Make sure your contract includes the right to request raw exports either directly from the distributor or from the DSPs when available.

What is the first move if I suspect fraud

Document everything. Save emails, screenshots, and statements. Send a formal audit demand quoting the contract clause. Consult an entertainment lawyer quickly. If fraud is suspected preserve evidence and consider seeking injunctive relief to prevent destruction of documents.