Auditing collecting society member royalties – developing a new copyright audit method for global use

Abstract

This thesis is an original contribution to fill gaps in the literature relating to both law and auditing as well as the practice of auditing copyright royalty income in the music industry. This is a multibillion rand South African industry whose principal assets are copyrights. The private control of copyright (relating to both authorship and ownership) coupled with the wide application throughout the music industry of private copyright contracts, together make auditing of copyright royalty income a rare occurrence in South Africa. This thesis aims to put forward a legally driven royalty audit artefact in the form of a functional new audit method to audit copyright royalty income. This new method, while being tested and validated on performing rights royalty income from musical and literary works - collectively "songs" in this thesis - also has wider application to other copyrights. The central hypothesis underpinning the new audit method is that copyrights in the terrain of law and auditing also relate to the quantitative world of numbers, and their correctness. This means the auditing of copyright royalty income must deal with legal issues as well as numerical ones. This poses a difficulty in that the skill set required to audit numbers and the skill set required to audit law have nothing in common. The research questions arose directly from a problem with the veracity of royalty reporting by a collecting society. The particular instance was royalty reporting by the Southern African Music Rights Organization (SAMRO) to Ms Hlengiwe Mhlaba over a period of 12 years. What quantitative and qualitative audit methodologies to audit performing rights royalty income existed, that would do the job? How could an audit method integrate the law and the audit, in a manner that substantiality improves, in business terms, the accuracy and veracity of copyright performing rights royalty income audit outcomes? Achieving the objective of this thesis required the design of a new method to audit copyright royalty income, specifically performing rights royalty income from musical and literary works (songs). This involved granular archival data collection in the framework of a single case study and the subsequent testing and validation of the new auditing method. The development of audit theory grounded in the data was driven by the researcher's hypothesis that both law and audit are indelibly related when it comes to auditing copyright. This thesis crafts and shapes a legally driven royalty artefact as a new and accurate copyright audit method with both local and global application.