Microsoft Audits – Why Be Prepared? 

Businesses have to be accurate and diligent when it comes to accounting and tracking the revenue that flows through the organization, how it is used, assets purchased and profits made, for submittal to the IRS every year. If they don’t and the IRS decides to perform an audit, it can be expensive, painful and, in some cases, bring forth criminal challenges.

Just like tracking other assets, it is extremely important for business owners to keep track of their software, especially when there are legal compliance requirements that go along with the utilization of that software. Similar to IRS audits, if a software vendor desires to formally audit a business customer for compliance with its software license requirements, it can also be expensive, painful and, in some cases, bring forth criminal challenges.

In 2014, Microsoft started a widespread effort to audit businesses and confirm compliance with the utilization of its software. It’s a fact that the majority of businesses utilize Microsoft products, and, to do its best to enforce compliance, Microsoft tops the list of software manufacturers that perform audits. Any business that has purchased Microsoft software is a candidate for an audit.

Microsoft’s audit would start with a notice directly from Microsoft to the business in the form of a letter or email, potentially initiated by a preliminary phone call. The types of audits Microsoft performs are as follows:

• Internal Self-Audit. The most common type of audit, this is when Microsoft requests a self-audit and verification via an “Estimated License Ownership Document” that it provides.
• Software Assets Management (SAM). This is also a self-assessment process, but a bit more formal than an internal self-audit. Microsoft is willing to use a SAM partner that it pays to assist in the process, or the audited business can obtain its own vendor assistance to help with the process, if desired.
• Legal Contracts and Compliance Audits (LLC). This audit is serious business and likely results from a company ignoring Microsoft’s audit requests or not providing the required information under the Self or SAM audits. Legal representation will likely be needed as the potential outcome can include penalties, fines and potential criminal prosecution if the audit were to turn up significant software non-compliance and software piracy issues.

A request from Microsoft for any of these audits should be taken seriously and responded to in a timely manner. When purchasing Microsoft or any other software, a business should always purchase through a trusted source or vendor, and keep receipts and inventory of the software it has purchased. A simple excel spreadsheet works great for software inventory tracking.

At the end of the day, if there are any discrepancies in the quantities or types of Microsoft software being utilized, it is required that the business purchase the licenses that should have been in place all along.

Brett Helgeson, the president of Phoenix-based Adopt Technologies, a provider of high-quality cloud and traditional IT services to small and medium-sized businesses.