12 Building a print circulations audit system

12.1. What is a circulations audit system?

A print circulation audit system is a combination of rules, regulations, and protocols – backed by a team of people, operations and infrastructure, and independent verification. It aim is to be capable of delivering to the marketplace a true picture of the circulation performance of the audited publications.

As stated previously, only publishers possess the real and full picture of their title’s circulation performance. By creating an ABC and its audit system, the advertising industry creates a mirror that most accurately reflects this performance. The picture must be clear, credible, understandable and unbiased. The data reported must be 100 percent reliable, comparable to similar other media indicators, and delivered in a timely manner.

The technical essence of the circulation audit is to independently verify the documentation and accounting of the publishers (in general by chartered public accountants), which act as proof of the different circulation types and quantities of a given publication, in a given time period.

The subjects of the audits are the publishers, while the advertisers and media agencies, as well as the public, at large, are the consumers of the audited data. The role of the publishers is to take part in the audits, while the role of the other two other arms of the market is to formulate their needs relative to the data, which will be audited and published, and to manage the audit standards and processes. The three parties should work together on establishing the most practical, valid and reliable audit system for a given market.

12.2. Key issues

Before beginning the work of creating an audit system, consider first the following critical issues:

• The existing audit systems of the ABCs around the world can be used as models, but in a fundamental way, an audit system must serve and be the product of its individual market. A viable audit system is a local adaptation, not a mechanical copy of any existing model.
• The construction of an audit system is very complex work, requiring a great deal of involvement and resources from the given market’s players. The decision-making forums of an ABC have an essential role to play in this process. No effort should be spared in the developmental process.
• An audit system must be based on a thorough understanding of the market’s technological environment, and the different business practices and monitoring processes taking place within the market. It is equally important to understand that an audit system requires expertise in financial auditing.
• Each and every decision related to the audit system will directly influence the quality and cost of the audits. There are many traps that should be avoided by thorough analysis and thinking. Good anticipation and attention to details is a key success factor.
• As any self-regulatory system, an audit system is the result of a compromise among the market players. It is the common denominator that will serve the needs of all audited publishers, regardless of the individual level of technology and complexity of the internal processes of any of the to-be-audited publishers.
• Both the design and the operations of an audit system involve very sensitive and special business data; therefore, data security and the trustworthiness of the involved people are imperative.
• Think twice before embarking into a “we will make it by ourselves” improvisational approach. It is better to have someone who is a master of the complex knowledge to help you in the effort – someone who is willing and ready to assist you in the process. Again, contact the IFABC to get proper advice.
• An audit system is a set of conventions, a theoretical approach to solving a very specific problem. Regardless of the architecture of a new audit system, it is critical to test all its assumptions before going into live auditing.
• The complexity and novelty of an audit system requires proper and continuous training of the publishers who will audit their publications, as well of the whole media/advertising market. An audit system is a standard that needs to be well explained and maintained.
• The beneficial result of the work will not come immediately; it will take time.

There is no receipt, or off-the-shelf solution, for having an audit system. It is complex work that requires thorough knowledge, careful planning and execution. There are many existing models, and a newly established ABC should be able to adapt these to its own needs.

12.3. A note of warning

As stated above, an audit system doesn’t come about by itself; it must be envisioned, designed and created by the members of the ABC. A mechanical copying of any existing audit system will never work properly, since it is alien to the given market.

There are many models around the world which can be taken into consideration (which I strongly advice to be studied), and the basic principles of these audit systems are the same (if I may say, universal), but there are particularities for every local market (see subchapter 6.2.), and these determine the architecture and the details of your future audit system. There is no recipe, only the hard work of understanding the principles of an audit system, seeking out and studying the best foreign models, and applying these to your given situation.

Many will be eager to have the audit system immediately – this isn’t possible. There is a first step to be taken first: forming the ABC. Then, you can take the second step of making your audit system.

I have seen ABCs, where small groups of players paid a lot of money (hundreds of thousands of U.S. dollars) to consulting firm(s) to create audit systems. This approach and the ABCs didn’t work, and their money was wasted. These ABCs sre now defunct. There are several other instances where the newly formed ABCs ended by being a place of gathering for its members, without specific goals and plans. These ABCs are merely clubs, but don’t provide any service.

So, get prepared to cope with some obstacles, unsuccessful meetings, and most generally, periodic bad news. Make sure that everybody has an awareness to expect such problems. This understanding will seemingly make your effort even harder, but your partners will at least be aware of the expectation.

When I worked with the development of the ABCs I helped to create (and for which I am still involved, it took us eight to 12 months from beginning to establish the ABCs to doing the first audit.

The time needed to establish and run an audit system depends heavily on the level of knowledge and understanding of the market processes, the intensity and level of involvement of the market players who work on the ABC initiative, and the presence of the assistance provided to the ABC by experts/consultants.

Another piece of challenging news: the initiative group should work (and finance) the first and very difficult stage of establishing the ABC, establish the audit system, then drive it toward the first audit. The cohesiveness and staying power of the initiative group is a great test of trust, cooperation and endurance. Ask yourself again: are you and your market ready for this test?

Last, but not least: the costs for doing audits are financed by the publishers, all over the world. There is no ABC where the advertisers or media agencies are financing these costs. They have a different role to support the ABC (in many cases by paying the membership fees), and to invest in the print advertising market. This is a trade-off publishers should be aware of.

12.4. The existing models

As mentioned earlier, there are more than 40 ABCs around the world, each providing among other services the (by now classical) print circulation audit. These ABCs represent the majority of the international media audit movement: the IFABC.

The IFABC has commonly agreed web and other digital measurement terminology. There is no agreement over print circulation audit standards. This is because of the very different market situations, as well as historical reasons. The IFABC was formed in 1963, when the joining members, established form the beginning of the last century, at different points in time, had already developed their own national advertising industries standards, which were in many cases incompatible. In contrast, at the time when the internet and world wide web traffic became an issue, the IFABC created a unique set of standards and metrics for measuring the web traffic which are applied by all its
members, and beyond.

Since the print titles production and distribution in different countries have many common features, one may discover a lot of similarities among different ABCs audit systems. Nevertheless, there is a wide array of details that are very unique.

There is no best audit system model. If one is seeking to pick the best model for his country/industry, please study as many audit systems as possible, and focus on those which show similarities to your own market. Try to get the best out of other’s work!

12.5. The architecture of an audit system

An audit system must be designed to collect, process, arrange, verify, and publish circulation data.

Audits can be carried out either on a real-time basis, or post-facto (after the facts). The former approach is used by the majority of existing ABCs. The reason is simple; it is extremely costly to make real-time audits. A full real-time audit means placing an individual next to each and every newsstand and mailbox to personally observe each financial transaction at the moment of its occurrence – a quite impossible task.

On the other hand, since publishers have to administer their operations in a legal manner, an auditor will be able to find (post-facto) enough information and documents that can stand the test of an audit. Some ABCs combine post-facto audits with real-time audits.

There is an important fact to note here: a full audit can be carried out only if the last issue of the audited period has been fully processed. This means not only that the physical distribution processes should be over, but also that the full reporting, settlement, invoicing, payments and accounting must be closed as well. If you consider the time that passes to administer these steps, then audits are carried out several months after the audit period ends. Many ABCs apply a combination of real-time (process) and post-facto verification.

An audit system must be able to provide data regardless of the variety and types of titles – frequency of issue, paid or non-paid distribution, distribution systems publishers are operating, the way the publisher is administering its documents and information, area of distribution, etc. At the end of the process, an ABC should publish audit certificates that contain standardized, and comparable data.

The elements of an audit system encompass:

• The audit certificate.
• Definitions.
• Classification (claiming) rules.
• Records and documents to be held, presented, and archived by publishers for audit purposes.
• Audit procedures.
• Audit programs.
• Auditors.
• Data reporting, gathering, processing, storage and publishing.
• Rules of publicity.
• Rules for complaints and penalties.
• Administration.
• Control.
• Education and training.

12.6. An example of an audit process

• The publication (of an ABC member) registers for the audit (the ABC provides the necessary registration forms).
• The ABC trainer (manager) visits the publisher, to discuss the whole process in details, and prepares the publisher for the audit.
• The manager and the publisher agree upon the first audit period and the audit fees.
• The publisher gathers, classifies and reports to the ABC and/or the auditors the preliminary circulation data, in the format provided by the ABC.
• The ABC issues the audit invoice, which is paid (in advance, or not), by the publisher.
• The ABC places the audit order to the auditor.
• The auditor arranges the audit date and place with the publishers, and they agree on which documents and information the publisher should prepare and submit to the auditor.
• The ABC (or auditor) verifies if the data sent by the publisher is correctly reported (checks for addition mistakes, missing information, misclassifications, etc.). In case of problems, they make the necessary adjustments.
• The auditor visits the publisher, and carries out the audit. In case any data is not claimed correctly, or not backed by enough auditable proofs, the publisher makes the necessary modifications/corrections. If major problems are identified, the auditor reports to the ABC, and, if it’s the case, he stops the audit, and writes a detailed report to the ABC. The report is submitted to the competent ABC forums (auditing director, technical committee, etc.) for review. A final report is to be issued, and, in the worst case, a statement is published.
• If no problems occur, or they are settled, the auditor closes the audit, and issues a clean (without opinion) audit report. The audit report is approved (signed) by the publisher, and then sent to the ABC.
• The ABC audit administration reviews the audit report, archives it, and publishes the audit certificate.
• The ABC formally announces to the publisher that the audit has been completed, and it has the right to use the ABC label/logo.