The CPCC has the right, under Part VIII of the Copyright Act, to conduct an on-site audit of reporting companies to confirm the accuracy of a manufacturer’s or importer’s reports and payments.  Audits may be conducted at any time during normal business hours on reasonable notice. Manufacturers and importers are liable for payment of audit costs if an audit reveals an underpayment of more than 10% for any one reporting period.

Who gets audited?

There are various factors that are assessed to determine whether a company should be audited. These factors include but are not limited to, the date of the last audit, reported volumes, brands reported and compliance concerns such as late reporting. Companies that began reporting as a result of enforcement efforts are often audited. In addition, when a company advises that it intends to cease reporting to the CPCC, the company’s file is reviewed to determine whether a close-out audit is merited.

Before an audit

Audits are initiated by a letter from the CPCC notifying the reporting company that it has been selected for an audit. The letter is sent no less than two weeks prior to the audit commencement date. The audit notification identifies the accounting firm that will be conducting the audit and sets a proposed date for the commencement of the audit.

The CPCC recommends that companies selected for audit review their records prior to the auditor’s arrival. An error reported to the CPCC prior to the audit will not be considered in the determination of whether the reporting company is responsible for payment of audit costs.  Any errors discovered during the course of the audit will be included in the calculation. For example, if a company reported no sales during a certain period and it is discovered during the audit that a sale was made, the company will be liable for the cost of the audit.

The following is a list of the types of records/information that will be required for the audit:

• Sales records
• Purchasing records
• Inventory records and access to physical inventory
• List of locations
• Banking records
• General ledgers
• Financial statements, and
• Supporting documentation.

After an audit

Once the audit has been completed and the audit report is finalized, the CPCC will advise the reporting company of the audit results.

• If levies are owing, the CPCC will enclose an invoice for the outstanding amount, including interest.
• If levies were under-paid by more than 10% for any reporting period, the CPCC will also invoice the reporting company for the cost of the audit, as provided for under the tariff.
• If the audit determined that levies were overpaid, the CPCC will advise the reporting company of the amount of credit to be applied against their next levy payment or payments.