Royalty & Licensing Audits
Linford & Company provides licensing audit and royalty compliance services to licensors (and for licensees) around the world. We use a unified team with deep experience in extraordinarily complex software, electronic, and mechanical technologies to conduct thorough but amicable audits across the globe. With company audit experience across North America, Europe, and Asia; individual experiences in over 30 countries; and an independent firm approach (as is required for CPA firms), we are equipped to meet your needs as a global licensor.
We conduct all royalty audits using a consistent approach that helps our licensor clients meet their fiduciary responsibilities for monitoring licensees’ compliance with licensing agreements. Years of experience performing these highly specialized audits have allowed us to develop and utilize an approach for conducting consistently effective and efficient audits and delivering concise, relevant findings.
- Planning: We work closely with the licensor to thoroughly plan each licensee inspection prior to engagement commencement.
- Coordination: We open channels of communication to ensure smooth coordination between the client (licensor), the licensee, and the Linford & Company team.
- Fieldwork: We execute customized work plans using our proprietary data analysis technologies and audit software in order to test for thoroughness and accuracy of the licensee reporting and payments.
- Reporting: All findings are confirmed and agreed in detail with the licensee. We then consolidate the findings into a clear, concise, and relevant report, along with our recommendations, and present to the licensor engagement team.
- Engagement Wrap-up: We conduct a closing meeting with the licensee to discuss findings and debrief the client to ensure all participants have a clear understanding of the engagement results.
Our royalty audit procedures are designed to test the completeness and accuracy of licensee reporting and payments. The most common procedures include:
- Patent Portfolio License (PPL) Review: We perform audit procedures to ascertain whether licenses are being interpreted correctly and royalties are being assessed on all applicable products under the license.
- Unit Accountability Review: We reconcile both unit sales reported to manufacturing and inventory data in order to find any units that were manufactured but never reported on the royalty statement. This procedure also determines why such units would not be royalty bearing.
- Revenue Accountability Review: We reconcile unit sales reported to audited financial statements or trial balances to find unreported royalties based on stated revenue.
- Analytical Review: We perform data analysis on anomaly situations where royalty-bearing units were not reported and may not have been caught by the Units Accountability Test or Revenue Accountability Test.
- Reporting: We prepare a report and exhibits illustrating the results of procedures which are presented to the engagement management team.
Linford & Company royalty and licensing audit services are effective, both in terms of identifying royalty underreporting and maintaining licensor/licensee relationships. For further details or to conduct an evaluation of our experience and qualifications, contact us.