[Code of Federal Regulations]
[Title 37, Volume 1]
[Revised as of July 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 37CFR261.6]

[Page 658-659]
 
              TITLE 37--PATENTS, TRADEMARKS, AND COPYRIGHTS
 
                                CONGRESS
 
PART 261_RATES AND TERMS FOR ELIGIBLE NONSUBSCRIPTION TRANSMISSIONS AND THE MAKING OF EPHEMERAL REPRODUCTIONS--Table of Contents
 
Sec. 261.6  Verification of statements of account.

    (a) General. This section prescribes general rules pertaining to the 
verification of the statements of account by the Designated Agent.
    (b) Frequency of verification. A Designated Agent may conduct a 
single audit of a Licensee, upon reasonable notice and during reasonable 
business hours, during any given calendar year, for any or all of the 
prior three (3) calendar years, and no calendar year shall be subject to 
audit more than once.

[[Page 659]]

    (c) Notice of intent to audit. A Designated Agent must submit a 
notice of intent to audit a particular Licensee with the Copyright 
Office, which shall publish in the Federal Register a notice announcing 
the receipt of the notice of intent to audit within thirty (30) days of 
the filing of the Designated Agent's notice. The notification of intent 
to audit shall be served at the same time on the Licensee to be audited. 
Any such audit shall be conducted by an independent and qualified 
auditor identified in the notice, and shall be binding on all Designated 
Agents, and all Copyright Owners and Performers.
    (d) Acquisition and retention of records. The Licensee shall use 
commercially reasonable efforts to obtain or to provide access to any 
relevant books and records maintained by third parties for the purpose 
of the audit and retain such records for a period of not less than three 
(3) years. The Designated Agent requesting the verification procedure 
shall retain the report of the verification for a period of not less 
than three (3) years.
    (e) Acceptable verification procedure. An audit, including 
underlying paperwork, which was performed in the ordinary course of 
business according to generally accepted auditing standards by an 
independent and qualified auditor, shall serve as an acceptable 
verification procedure for all Designated Agents with respect to the 
information that is within the scope of the audit.
    (f) Consultation. Before rendering a written report to a Designated 
Agent, except where the auditor has a reasonable basis to suspect fraud 
and disclosure would, in the reasonable opinion of the auditor, 
prejudice the investigation of such suspected fraud, the auditor shall 
review the tentative written findings of the audit with the appropriate 
agent or employee of the Licensee being audited in order to remedy any 
factual errors and clarify any issues relating to the audit; Provided 
that the appropriate agent or employee of the Licensee reasonably 
cooperates with the auditor to remedy promptly any factual errors or 
clarify any issues raised by the audit.
    (g) Costs of the verification procedure. The Designated Agent 
requesting the verification procedure shall pay the cost of the 
procedure, unless it is finally determined that there was an 
underpayment of ten percent (10%) or more, in which case the Licensee 
shall, in addition to paying the amount of any underpayment, bear the 
reasonable costs of the verification procedure; Provided, however, that 
a Licensee shall not have to pay any costs of the verification procedure 
in excess of the amount of any underpayment unless the underpayment was 
more than twenty percent (20%) of the amount finally determined to be 
due from the Licensee and more than $5,000.00.