Commission a royalty compliance review with specific procedures

Ask counsel to identify the inspection or review rights in the licensing agreement, including parties, periods, notice and permitted records. Give the accountant those boundaries before it proposes procedures. A commercial wish to inspect every sale does not establish access to every system or historical period.

State the decision the work will support: verifying a reported royalty, understanding a discrepancy or evaluating a potential claim. The engagement should distinguish factual procedures from legal interpretation and recovery activity. Ask the candidate to explain which role it can accept and where another adviser is needed.

List licensed products, territories, channels and periods relevant to the agreement. Identify which royalty statements and source records will be compared. Have the parties or counsel resolve disputed contract definitions rather than asking the accountant to select a preferred legal interpretation silently.

Include the treatment of returns, credits, bundled products and other items where the actual agreement makes them relevant. The objective is a procedure tied to the contractual reporting base. A generic sales-total comparison may miss the exact definition on which the royalty depends.

If agreed-upon procedures are proposed, AICPA describes that engagement as reporting findings without an opinion or conclusion. Ask the practitioner to specify each procedure, source and result. The parties need to know whether the work examines all records, a selected sample or a different defined population.

Where the matter is investigative or litigation-related, ask the professional to identify the applicable standards and role. AICPA's forensic standards address covered engagements in those contexts. Do not use the phrase royalty audit to imply a financial statement audit or assurance the provider has not agreed to give.

Agree how missing records and observed differences are reported. A finding may require further explanation before it becomes a supported underpayment calculation. Keep the factual result, contractual interpretation and proposed monetary adjustment distinguishable in the deliverable.

Coordinate access through the authorized parties and protect confidential licensee information. Specify who can contact staff, request additional records and discuss preliminary findings. Avoid parallel informal requests that exceed the agreed inspection process or expose unrelated commercial data.

Price expanded testing, revised populations and follow-up separately where they are conditional. If the agreement addresses allocation of inspection costs, have counsel interpret the actual clause. A provider's fee proposal should not assume that the other party must reimburse every cost before that condition has been assessed.

Check that the report identifies procedures performed, evidence received, findings and limitations. Ask the accountant to explain unresolved differences and what additional work could resolve them. Management and counsel then decide whether to seek clarification, negotiate or take another permitted step.

Before the visit or data transfer, ask counsel and the practitioner to resolve whether customer-level detail may be copied or only inspected. Record any restriction in the procedure design so the final report explains the evidence actually available, rather than implying unrestricted access to the licensee’s records.

Retain the report, relevant source index and agreed communications under the confidentiality terms. Keep collection, settlement and later proceedings outside the accountant's authority unless expressly commissioned. The review should leave a traceable record of what the evidence establishes, without promising a recovery or declaring a legal breach beyond the professional's scope.