An audit clause is the contractual right for an artist to examine a label's or distributor's books to verify that royalties were calculated and paid correctly.
The mechanism
It defines who may audit, how often, over what period, at whose cost, and within what window after a statement is issued. Statements typically become final and unchallengeable once that window closes.
A worked example
A clause allowing audit within two years of a statement means errors in a statement three years old are generally no longer recoverable, regardless of size.
What it is confused with
- A dispute An audit is an inspection right exercised under the contract, not litigation, and is frequently resolved without any.
Why it matters
It is one of the most commonly unexercised provisions in a recording agreement, and the right expires on a clock most artists never track.
Sources: US Copyright Office
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Related: Recoupment · Black box royalties · 360 deal