The following TMT practice note provides comprehensive and up to date legal information covering:
The expression of audit rights in a contract, and the requirement to maintain records relating to that contract in a particular manner, are an essential component of any outsourcing. Effective oversight allows a customer to ensure that services are being performed as expected and provides an opportunity for the supplier to demonstrate compliance with the contract.
This Practice Note considers the following key issues in relation to record retention and audit rights in outsourcing transactions:
How long records should be kept
Consistency with other terms of the contract
For examples of drafting that can be used in record retention or audit provisions of an agreement, see clauses 22 (Records) and 23 (Audit) of Precedent: Outsourcing agreement—long form.
There are several key questions that the parties will need to answer in order to determine what is appropriate in any given situation:
What are the record retention requirements for each of the customer and the supplier both at law and in relation to internal policies?
What audit rights (if any) does the customer require in order to satisfy any regulatory obligations or to allow the customer to satisfy its regulators that it has appropriate oversight of the services?
What audit rights (if any) does the customer require in order to prudently manage the supplier in
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