Key Differences: Soft vs. Official Audit
- Notice Requirements
Official audits require prior written notice—often 30–45 days. This not only provides the customer with time to prepare and seek expert guidance, it puts the company on notice that an invasive and risky process has begun. Soft audits? No notice at all. As Art Beeman of Beeman & Muchmore said, “You may be in the midst of a soft audit and not know it until it is too late.”
- Interference With Business
Contracts often require that audits refrain from unreasonably disrupting business operations. Oracle’s contracts, for example, include the clause, “Such audit shall not unreasonably interfere with your normal business operations and shall be subject to 45 days’ prior written notice.” This clause ensures that while vendors have a right to audit, it must be conducted without excessive disruption to your organization. This clause is, of course, subjective, and it’s actually silly to ever believe that an audit is going to not be somehow disruptive. It does, however, provide the customer with a modicum of warning and at least a momentary signal that preparation is wise.
Soft audits? No such guardrails. These can be intrusive without recourse.
- Scope
An official audit is generally limited to your use of the vendor’s software and your compliance with the license terms outlined in the agreement. In theory, vendors should not investigate unrelated systems or products outside the scope of those licenses. Again, these boundaries are very subjective in actual implementation.
So, in real practice, the customer may need to assert boundaries if a vendor attempts to overreach. It’s critical to understand—and enforce—what is and isn’t included in the audit. In contrast, a soft audit has no formal boundaries. Any question is fair game. Vendors often use these informal reviews as broad, data-gathering efforts, fishing for compliance gaps under the guise of respectful helpfulness.
- Frequency
It’s common for software license agreements to include limits on how often a vendor can perform an audit—typically, it’s no more than once every 12 months. This offers some protection against repeated or overlapping audits that will, in reality, disrupt your operations.
Soft audits? No such limits. Vendors—or their partners—can initiate a soft audit at any time, with the frequency at their discretion. Because these reviews aren’t governed by the formal audit clause, there’s no contractual safeguard against rate of recurrence.
Bottom Line: Soft Audits Are Just as Dangerous as Classic Audits, Maybe More So
Make no mistake—both formal and soft audits have one primary purpose: generating revenue for the vendor.
In some ways, soft audits are more dangerous. When a customer receives an official audit notice, shields are raised. But a few, innocent-sounding questions from an “account rep” can quickly lead to disclosures that put you at risk. “Treat all vendor inquires with the severity of a formal audit,” Muchmore concluded. “You won’t be sorry.”
Soft audits are gaining traction because they work. Vendors are generating more revenue with less effort and less pushback.
Don’t do their work for them. Remember that when facing Major League pitching you need Major Leagues hitters. We couldn’t help ourselves, we did get a baseball analogy to fit this article. Pay attention though, or you will get hit on the head with a fastball.