You’ve received a software licensing audit letter. What do you do now?
You can disregard it, which is unwise, or react to it in a number of ways. There are better and worse ways of handling an audit, and if you don’t know the difference, your audit experience may be more costly, time-consuming, and frustrating than it needs to be.
Most companies want to do the right thing, but that very desire may drive them to take actions that are not in the best interest of their organizations. Here are a few factors that can help or hurt.
Getting Audited? Get help
The worst thing to do is to react to a software audit without thinking. It is far wiser to involve your in-house legal department or outside counsel, so you can understand how you can respond to the audit notice without exposing your company to unnecessary risks.
“I wouldn’t just start handing over information. There are a lot of details that need to be checked, such as the licensor’s right to audit, restrictions on it, how confidentiality works, and so on,” said Greg Wrenn, a partner at law firmParadigm Counsel, in an interview. “If you get a notice, talk to your legal adviser to ensure you don’t expose anything that’s inappropriate when facing a situation like that.”
It’s important to cooperate with the auditors, but in the spirit of doing so, individuals may start handing over information that can be used as evidence if the matter proceeds to litigation.
“The No. 1 thing people should do is be very careful about who they allow to respond, and how they respond,” said Robert Scott, managing partner at law firm Scott & Scott, in an interview. “You need to be very disciplined in your approach when responding to audit requests. Most companies are honest and diligent and they acquiesce to the publisher’s methodology. The company cooperates, and later when it gets a financial demand [and] the company finds itself in an adversarial situation.”
Some of the exposure could have been avoided if the audit had been managed more responsibly, meaning that the right stakeholders were involved in responding to the audit.