Right to Audit Clause

What It Does

A right to audit clause gives one side a way to check the other's work rather than take it on trust. The auditing party gets access to records or systems; the audited party takes on the burden and risk of that access. For in-house counsel, the clause is usually more dangerous when you are the one being audited, because an open-ended audit right is an operational and security liability. The terms that matter are the boundaries: how often, on how much notice, over what period, into what records, and at whose cost. A practical test: if a vendor can audit your systems at any time, with no notice, no frequency cap, and no confidentiality obligation, the clause is a standing disruption you have agreed to in advance.

• Grants access to records, systems, or facilities to verify compliance or payments

• Turns on scope, frequency, notice, and lookback period

• Allocates cost, often shifting to the audited party only on a material underpayment

• Covers financial, license-usage, regulatory, and security audits

• Should bind the auditor to confidentiality over what it sees

The market-standard guardrails are one audit per twelve months, reasonable prior written notice, a bounded lookback, and an underpayment threshold that shifts cost.

Examples

Marqeta, Inc. / Sutton Bank

Eighth Amendment to Prepaid Card Program AgreementBank audits manager, at-expense, audit-or-reportOne-Sided2025

"Manager acknowledges Sutton Bank has the right to audit any such ledger at least once per year or, in lieu of such audit, Sutton Bank may request Manager provide a copy of a report of an independent audit obtained by Manager, at Manager's expense, that reasonably satisfies Sutton Bank's expectations."

Source

Green Plains Inc.

Marketing AgreementMutual records audit, lookback capMutual2025

"During normal business hours, each party shall have the right to audit such books, records, documents, contracts, accounts and electronic data as it relates specifically to GPTG's fuel grade ethanol purchases hereunder... provided such right to audit shall be limited to two (2) calendar years following the completion of any sale."

Source

AllianceBernstein L.P.

Office LeaseTenant audits landlord's operating expenses, time-limitedOne-Sided2025

"Audit Rights: Tenant has the right to audit Landlord's books and records relating to Operating Expenses for a period up to (i) three years following the receipt of any Statement for the Stabilized Adjustment Period and any Adjustment Period prior thereto, and (ii) two years following the receipt of any Statement for any Adjustment Period after the Stabilized Adjustment Period."

Source

Beyond, Inc.

Amended and Restated Commercial AgreementPayment audit, underpayment true-up with interestMutual2025

"In the event such audit reveals an underpayment by a Party, such Party will within thirty (30) days' pay the amount in excess of the fees actually paid together with interest accrued from the date such amounts were originally due."

Source

Negotiate

If you hold the audit right:

You want to verify

• Secure access to the records or systems you need to confirm payments, usage, or compliance, described specifically rather than vaguely.
• Add an underpayment cost-shift, so a material shortfall, often more than 5 percent, makes the audited party pay for the audit.
• Allow a qualified independent third party to conduct the audit, and require a true-up of any amount owed plus interest.

If you're the one being audited:

You want to limit disruption

• Cap frequency at once every twelve months, require reasonable prior written notice, and limit the lookback to a defined period such as two years.
• Narrow the scope to records relevant to this agreement, and conduct the audit during business hours with minimal disruption.
• Require the auditing party and its auditor to sign confidentiality obligations, and make the auditor bear the cost unless a material underpayment is found.

The audit right itself is rarely the fight; the boundaries around it are, so spend the negotiation on frequency, scope, notice, and cost.

Red Flags

• An audit right with no frequency cap, notice requirement, or lookback limit, which allows open-ended disruption.

• No confidentiality obligation on the auditing party or the auditor accessing your sensitive records.

• A security audit that permits unrestricted access to systems with no scoping or coordination.

• Cost borne by the audited party regardless of outcome, even when no underpayment is found.

• A software-license audit that lets the vendor true up at list price plus penalties with no dispute mechanism.