Global high-tech companies waste billions of dollars annually and may be encouraging piracy by failing to audit partnerships and enforce contracts, a study warned.

George Leopold, Contributor

August 15, 2006

1 Min Read

WASHINGTON — Global high-tech companies waste billions of dollars annually and may be encouraging piracy by failing to audit partnerships and enforce contracts, a study warned.

KPMG, the U.S. audit and tax advisor, said 72 percent of the 155 companies it surveyed had contractual relationships with other companies. Of those, only 6 percent said they audited half of the terms of these partnerships.

Nearly one-third said they audited only 10 percent of the terms of their partnerships.

"At a time when high-technology businesses must juggle tight margins with intense competitive pressures, billions of dollars may be unaccounted for due to inadequate controls over the process of self reporting critical business information," Rob Pink, a KPMG advisory partner, said in a statement accompanying the report.

Lax auditing may also increase the risk of piracy.

Contracts involving royalties require partners to report sales under license to their partners. "Relying too heavily on trust can lead to a weakening of companies' own intellectual property rights," Pink said. "Companies that do review their self reporting relationships are likely to improve their revenues through better enforcement of contract terms."

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