Guide for Initial Audits

During the Initial Audit

During the initial audit, the auditor will:

• Conduct an audit of your circulation to ensure compliance with ABC rules, policies and guidelines.
• Request documentation necessary to complete the audit.
• Expect timely receipt of documentation, or communication updates regarding status of the documentation.
• Inquire about your circulation, distribution and accounting practices.
• Inquire about any analysis results or discoveries resulting from review of documentation.
• Expect timely responses to all inquiries regarding the audit.
• Collaborate with you and the audit manager to resolve any audit concerns discovered during the audit process.
• Discuss any questions or concerns you have about ABC rules, qualification requirements, and reporting formats.
• Provide feedback regarding any potential record keeping or other improvements that could result in a more efficient audit in the future.
• Present a draft audit report and summarize all final audit discoveries and decisions.
• Require a signature on the draft circulation audit report.
• Require a signature on the draft postal audit report (if you chose to have ABC conduct your postal audit.)

The time it takes to complete your audit, the extent of testing required, and documentation needed is dependent on the specific type(s) of circulation you distribute.

• To determine the type(s) of circulation you use, please see the section on ABC Reporting Classifications Defined.
• To view a list of general documentation you need to prepare for each type of circulation you distribute, please see the section on Preparing for Your Initial Audit: Documentation.

Test of Subscriptions
For paid subscriptions, the ABC auditors will conduct testing to ensure all circulation classified as paid complies with the rules and guidelines for this type of circulation. This includes, but is not limited to, a review of subscriber orders, proof of subscriber payments, and credit cancellations.

For verified subscriptions, the ABC auditors will conduct testing to ensure all circulation classified as verified complies with the rules and guidelines for this type of circulation. This includes, but is not limited to, a review of any contracts, opt-in or opt-out notices, list sources, subscriber orders, and mail galleys. The auditor will also ensure that the minimum consecutive issuance requirement has been met.

Where the audit staff will conduct your audit depends on the type of fulfillment operation you have for any paid, verified or non-paid subscriptions. There are two types of fulfillment operations:

1. In-house
   This refers to an operation where the publication fulfills its subscription orders, maintains subscriber account details, and processes any subscriber payments. If you have an in-house fulfillment operation, then ABC auditor will need to conduct the audit on-site at the offices where your subscription information is maintained. If an auditor works at your office, you will need to prepare an appropriate space for the auditor to work (desk, chair, phone, etc.) and access to the necessary individuals who can respond to the auditor’s requests and inquiries in a timely manner.
2. Third-Party Fulfillment
   This refers to an operation where the publication contracts with an outside fulfillment company to handle the fulfillment of its subscription orders, maintain its subscriber account details, and processes any subscriber payments. If you utilize a third-party fulfillment operation, the audit testing is conducted at the fulfillment center location where the subscription records, including payments, are maintained.
   
   Most third-party fulfillment operations are familiar with ABC and its audit requirements. However, it is your responsibility to notify your fulfillment operation that you applied for ABC membership. In doing so, most fulfillment operations will automatically know what various reports and documents are necessary for the ABC audit and will discuss these with you.
   
   Although most of the audit will be conducted at the fulfillment location, the auditor will still request some documentation from your publication directly, such as invoices from the printer, postal records, etc. Upon request, you should mail the documentation to the auditor at the fulfillment location in a timely manner, so the audit may continue efficiently.
   
   NOTE: It is the publication’s responsibility to ensure all documentation and information requests are provided to the ABC auditor in a timely manner, regardless if a third-party fulfillment operation is used. See also Bylaw 2.8 Publisher Duty to Install and Maintain Records.

Test of Single Copy
Our auditors will verify that your single-copy sales reported for your initial audit were distributed, resold to consumers, and paid for at a qualifying price. This will include an analysis of any retail accounts you handle directly, as well as those of any third-party distributors that handle the retail accounts for you.

Any distributors you utilize will need to provide you with an interstate/inter-provincial survey. This is a document the distributor prepares to inform you of the geographical breakdown of their net sales, by U.S. state and Canadian province, for the analyzed issue. You should contact your distributors soon after you apply for ABC membership to inform them of the upcoming audit, so they are able to prepare this information for you.

As a note, ABC staff can work directly with some of the single-copy distributors to obtain any additional material we need—such as the interstate/inter-provincial surveys, invoices and payments.

Test of Analyzed Non-paid Circulation
The ABC auditors will conduct testing to ensure all circulation classified as analyzed non-paid complies with the rules and guidelines for this type of circulation. This includes, but is not limited to, a review of list sources and mail galleys. They will also ensure the minimum consecutive issuance requirement has been met for circulation classified as list source.

NOTE:
If you distribute non-paid bulk copies, please ensure your application clearly indicated such circulation and its accurate quantity. Non-paid bulk circulation may need to be tested by our auditors in “real-time.” This means our auditors will need to physically observe the distribution of the copies to their final distribution location and possibly to the final recipients of the magazine. If you distribute a significant quantity of non-paid bulk copies, then prior to the period you selected for your initial audit, the ABC audit manager will contact you to discuss the necessary documentation and timing of this type of testing.

Continue to "Preparing for Your Initial Audit: Documentation" >>

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