How to Make Sure You're Prepared for a Software Audit

That big software audit you’ve been dreading? Yeah, it’s coming, it’s real, and it’s sooner than you think. But why, oh why, do we even have to face these in-depth software inspections in the first place? How hard can it be for them to just take your word that every software license on your system is perfectly up-to-date?

As you probably know, that’s not how things work with audit management. In this article, we’ll tell you why these audits are essential and how to be ready when the time comes. You don’t want to be caught off guard because things can get costly, fast.

But first, let’s take a small detour and walk through the basics.

What is a software audit?

A software audit is a formal review of an organization’s software assets to verify usage, licensing, and compliance with vendor agreements. These reviews may be conducted internally or triggered by a third party, such as a software vendor or external auditor.

The primary goal is to confirm that the organization is using software within the terms of its licensing agreements. Audits also help identify unused, unauthorized, or outdated installations that may introduce unnecessary costs or security risks.

While they’re often seen as a legal or financial check, software audits can also surface operational issues — like inconsistent tracking, unmanaged licenses, or overlapping tools.

Software Audits

The importance of a software audit

From a vendor-side point of view, the main purpose of audits is to spot any compliance gaps, places where a certain bit of software is not being used as intended. And if that happens and an auditor finds it, they will be walking away with your lunch money, guaranteed.

An internal software audit, on the other hand, serves additional purposes that are about optimizing operations.

As a general rule of thumb, though, a software audit will help you:

Make sure you reduce the number of inactive licenses. This is a budget-saving strategy.
Keep your licenses up-to-date. Outdated licenses can be even more costly because they could lead to legal issues if you’re caught using software you’re not supposed to (this is why software license monitoring is so important). In fact, even if you’re not using the software or the license has expired, the only way to actually end a contract is to contact the software vendor.
Find out possible areas for improvement. Audits can help you find out whether the tool you’re using is healthy, what’s working and what’s not, and if you need updates. Plus, quality assurance is not just an internal thing, but something you’re going to be going over with your software vendor(s) frequently.
Find out whether you need any new tools. This part is about assessing the health of existing tools, as well as what additional tools could fill in the gaps. Also, here’s where you perform compatibility checks to make sure that the new additions mesh nicely with your current systems.
All in all, it will help you save money. You’ll cut costs by removing software that’s not running well (or not running at all) and getting newer, better software that minimizes losses in the long run.

The software audit process

Audits typically follow a step-by-step process to assess the current state, compare it against licensing records, and outline any necessary actions.

A software audit may begin with an official notice from a vendor, but internal audits are often scheduled periodically as part of IT governance. Most reviews focus on:

What’s installed across the organization.
Who’s using the software and how often.
Whether the usage matches the purchased licenses.
If there are any unauthorized or outdated installations.

Whether external or internal, here's how the audit process unfolds:

1- Data collection and inventory reconciliation

The first step involves collecting detailed information about all installed software. This includes version numbers, device locations, user assignments, and installation dates.

With InvGate Asset Management, you can automate this stage using an agent that scans your network and devices to build a complete software inventory. Cloud, on-premises, and remote environments are all included — without needing manual spreadsheets or separate systems.

2- Comparison between installed use and licensed entitlements

After building the inventory, the next step is comparing it against license entitlements. This means checking whether each installation is authorized and determining if you’ve exceeded or underused your licenses.

InvGate's software compliance tracking module flags any mismatches. You’ll see where you may be under-licensed (risking penalties) or over-licensed (wasting budget).

3- Analysis of findings

Once gaps are identified, the audit team reviews them for accuracy and context. Not every deviation is a violation — sometimes the issue is outdated records or license assignments that weren’t updated after employee departures.

With InvGate, automated alerts and customizable health rules can point out these anomalies early, helping you address them before they show up in the final audit report.

4- Audit report and recommendations

The auditor compiles a report summarizing the current software state, any compliance issues, and recommended actions. This may include purchasing additional licenses, removing unauthorized software, or improving internal controls.

InvGate’s custom reports and dashboards allow you to export audit-ready documentation and share it with relevant stakeholders, making this step faster and clearer.

5- Audit finalization

Once remediation is complete, the audit is formally closed. If conducted by a vendor, there may be negotiations around back payments or license adjustments. Internal audits usually conclude with documentation updates and a plan to monitor progress.

Software audit checklist

An audit checklist helps you prepare and stay organized before, during, and after a review. Here's a basic one you can adapt:

Create or update your software inventory.
Reconcile installed software with license entitlements.
Identify unauthorized, outdated, or unused installations.
Document software ownership and usage policies.
Prepare records of vendor contracts and license keys.
Review past audits and remediation efforts.
Generate compliance and usage reports.
Define internal roles and responsibilities during the audit.
Create a response plan in case of external audit notifications.
Set up a recurring internal audit schedule.

Software audit best practices

As part of audit management, the smart thing to do is to conduct your own internal audits from time to time.

This way, you can tackle compliance issues as soon as they appear and be prepared for external audits — avoiding the last-minute scramble when a vendor reaches out. In this sense, Aaron Davenport gave great advice on Episode 6 of Ticket Volume, our tech podcast, that applies well to regular internal software audits:

"The first thing you do [when you receive an audit letter] is you say, 'Okay, is this something I should be concerned about?' Because of contractually, you may have a no audit clause, they might not even legally have a right to audit you. So you might want to read real quick before you make that quick response of, "Hey, uh-oh, I got an audit letter.

That's what they want you to do. They want you to get scared. So my first thing is to say, don't panic. You may owe them money, you may not owe them money, but they don't know as much about your environment as you do. So get your facts straight."

Aaron Davenport
Software asset management specialist
Episode 6 of Ticket Volume

A calm, informed response starts long before the letter arrives. Here's what to keep in mind to run internal audits effectively and reduce audit-related stress:

Document everything. Keep records of license agreements, purchase orders, renewal dates, and any vendor communications. These documents can help you challenge inaccurate audit claims and justify your software usage.
Centralize license ownership and management. Assign responsibility to a specific role or team to avoid gaps in tracking when employees move or leave the organization.
Include cloud services in your audits. SaaS and subscription tools often operate under different licensing models, and it’s easy to overlook them if your focus is limited to on-premises software.
Define a remediation workflow. If discrepancies appear, make it clear who should be notified and what steps should follow — whether it’s uninstalling unauthorized software, reallocating licenses, or contacting the vendor.
Review contracts carefully. Some agreements include clauses that limit audit frequency or specify how they must be conducted. Knowing your rights helps you respond appropriately.
Link audit insights to procurement decisions. If your audits consistently surface underused software, reconsider renewals or negotiate smaller license volumes.
Use audit-ready reporting. Tools like InvGate can generate reports with detailed breakdowns of assets, compliance status, and changes over time — which are useful not only for audits but also for internal reviews and board reporting.

Software audits are easier to manage when you're not trying to catch up. Building internal audit practices into your regular IT operations gives you control over your environment.

Some extra tips for an internal software audit include having the support from other departments or teams — such as compliance or risk department — and, as we mentioned before, acquiring a Software Asset Management tool. The latter will let you map your hardware and software inventory, and have a software license monitoring strategy in place, among other things.

In conclusion

Software audits are part of the life of any IT organization. And that means you have to be ready when the time comes. Proactive measures, more than anything, will save you the time and money you desperately need to keep your business thriving, growing, and improving.

So, it’s not just about keeping auditors happy, but about constantly checking for errors or structural weaknesses. And that’s not just something you’re doing because you’re legally entitled to; it’s just part of playing the game in a smart, sustainable way.

So, embrace the audits. If you play things right, they’ll work in your favor rather than against you.

We can help you always be audit-ready! Try InvGate Asset Mangement for 30 days.