WHAT IS AN AUDIT CLAUSE? - by Obellaworldstar

SEYI VIBEZ, SHALLIPOPI AND DAPPER MUSIC HAVE BEEN ARGUING OVER MONEY, CONTRACTS AND ACCOUNTING. The artists have made allegations about how their business was handled. Dapper has denied wrongdoing and called for an independent forensic audit of the contracts, payments, accounts and distribution records. And honestly, this is where I want artistes to pay attention. Don't just sign a record deal. Make sure there is an audit clause in your contract that gives you the right to audit the label's earnings from your music periodically. Also, make sure what is considered an external or label deduction is clearly specified. This is why I believe that every good record deal should have an “AUDIT CLAUSE.” SO, WHAT IS AN AUDIT CLAUSE? An audit clause is a provision in a contract that gives an artiste the right to examine and verify the financial records of the label and check the label's accounting of money generated from the artiste's music. For example, if the label sends you a royalty statement showing what your music earned and what you're entitled to, the audit clause gives you the contractual right to verify how those figures were arrived at. WHY IS THIS NECESSARY? Because a royalty statement is an accounting. And an accounting should be capable of being verified. The artiste may want to know whether all revenue was reported, whether the deductions made were permitted under the contract, whether the calculations were correct and whether there are discrepancies between the label's records and other relevant records. WHERE IS AN AUDIT CLAUSE NEEDED? It's particularly important in agreements where one party controls the collection, accounting or distribution of money that belongs partly to another party. That can include: Record deals. Distribution agreements. Publishing agreements. Management agreements. Joint ventures. And other music business arrangements involving shared revenue. HOW DOES THE AUDIT ACTUALLY HAPPEN? The artiste engages an accountant or qualified auditor to examine the relevant records and compare them with the statements provided. But here's the question: If a discrepancy is discovered, do you know what happens next? Tomorrow, I'll talk about it and the necessary solution that should also be included in the contract to protect the artiste.

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