The audit clause is one of the clauses that always needs to be present in a video game publishing agreement. It is the developer’s only way to verify whether the royalties they receive are correctly calculated. While an audit clause may sometimes be missing in a first draft, it is crucial to ensure that one is in place before signing the agreement. Without it, a developer effectively has to trust the publisher’s word on every financial statement—without any means of verification.
What is an audit clause?
The audit clause is a clause in a video game publishing agreement which gives the developer the right to check whether the publisher’s calculation of royalties is correct. In most cases, this is done by appointing an independent accountant to examine the publisher’s financial records.
An audit clause ensures that if something looks off in the royalty reports—or if sales seem lower than expected—the developer can independently confirm whether the royalties have been calculated accurately and whether any deductions were made in line with the contract.
Why the audit clause matters
In most video game publishing agreements, the publisher provides the developer with periodic royalty reports. These reports detail how much revenue the game has generated and how royalties were calculated. The developer’s royalties are based on this data, typically covering:
- The developer’s role in creating the game; and
- The exclusive license granted to the publisher to publish and market it.
The total royalties often depend on the revenue generated from the game’s sales and the deductions agreed in advance—such as marketing expenses or platform fees—before applying the royalty percentage.
Some developers believe it is sufficient to rely on information available on the platform, such as the Sales Report accessible through Steamworks. However, these reports only show sales data; they do not include information about the deductions or additional costs that affect royalty calculations.
Tproperly verify the royalty statements, the developer also requires access to the financial details of these deductions. Because this information is not public, the developer requires the publisher’s cooperation. The audit clause grants that cooperation as a contractual right.
Although audit clauses are not enforced often, their existence alone provides a valuable safeguard. It allows developers to verify the figures behind their payments whenever doubts arise and ensures publishers maintain transparent and accurate reporting practices.
Example of an audit clause in a video game publishing contract
Below is an example of the audit clause from the publishing agreement Raw Fury has publicly shared:
“Publisher agrees that Developer at its own cost may once during any calendar year, audit its books and records for the purpose of determining the accuracy of Publisher’s Royalty Statements to Developer. If Developer wishes to perform any such audit, Developer shall notify Publisher in writing at least thirty (30) days prior to the planned audit. All audits shall be made during regular business hours, and shall be conducted on Developer’s behalf by a certified independent public accountant. Each examination shall be made at Developer’s own expense at Publisher’s regular place of business where the books and records will be made available to Developer’s accountant. In the event that Developer establishes as a result of an audit conducted by Developer, that there is a discrepancy in the Developer Share payments due to Developer of five percent (5%) or $10,000, whichever is greater, for the period covered by the audit, then Publisher shall pay to Developer, upon settlement of the audit, Developer’s reasonable third-party legal and auditor’s fees and disbursements actually incurred in connection with such audit and interest at the rate of five percent (5%) per annum on the underpaid amount.”
This example illustrates the most common structure: a developer-initiated audit, advance notice to the publisher, access to financial records by an independent accountant, and reimbursement if a significant underpayment is discovered.
How to review and negotiate the audit clause
Limit audits to a reasonable frequency
It is important to agree on a frequency that ensures a developer has sufficient opportunity to assess the accuracy of the royalty reports. At the same time, publisher should not be overburdened with excessive audit requests.
In this context, it is also important to check whether the contract includes an objection period for royalty statements. If such a period exists, it should be considered when reviewing the audit clause to ensure the developer has enough time to act within the allowed window.
Require audits by an independent professional
It can be important to determine whether a developer can perform the audit themselves or whether this can only be done by a third party, such as an accountant. In practice, many developers do not have the financial or accounting knowledge to perform an audit themselves. Having a qualified, independent professional conduct the audit can therefore be in the best interest of both parties, as it ensures accuracy and credibility.
Shift audit costs if significant underpayments are found
By default, developers pay for the audit. However, many contracts include a clause that allows developers to recover these costs if an underpayment is discovered.
Such reimbursement clauses typically state that if the audit reveals a significant discrepancy—often defined as an underpayment of at least 5-10%– the publisher must cover the reasonable or actual costs of the audit. This includes legal and auditor fees and ensures the developer is not financially penalized for uncovering a reporting error.
Before you sign: summary and next steps
The audit clause is a developer’s safety net to verify whether royalties are calculated and paid correctly. Without it, there is no practical way to confirm the accuracy of a publisher’s reports.
By negotiating a balanced audit clause, with fair limits on frequency, clear requirements for who performs the audit, and reimbursement of costs in case of underpayment, developers can protect their income and ensure transparency in their publishing relationships.
If you’re reviewing a draft contract and notice the absence of an audit clause, or if the clause seems one-sided, it’s best to have a legal professional experienced in video game publishing review it before signing.
Next up, we’ll look at the Key Personnel Clause.