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Besides being possibly against their own interest, as less profit for the authors make them less likely to create new books/products, and therefore provide less things for sellers to sell.

But theoretically they could always sell some e-books/products hidden from the author and increase their profits in the long run, with the vast amount of content from many different authors.

Again, the best counter argument I can imagine is that it would be safer and simpler to just increase their rates "accordingly" and spread this "extra" profit all over, to avoid the risk of a programmer pulling off an "Assange" whistle-blowing move and damaging their credibility, possibly leading to legal action against them.

The more concrete way to be next to sure that nothing like that is happening would be if there were some sort of trustworthy third-party auditing of their mechanisms. Is there such a thing?

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Ultimately this question is unanswerable because digital purchases involve an element of trust between content creator and distributor.

This is a real issue with the arts business, because fixed expenses by publishers get tacked onto royalty calculations. Also, with creative content, budgets tend to be smaller, so there is less urgency for audits and confirmation. Smaller publishers also have less staff and infrastructure to do record keeping in a timely fashion.

But even with Amazon.com and similar kinds of companies, you can't really know. Amazon provides great reports of sales and royalties, but sometimes reporting is interrupted for some reason. Generally, though I have no reason to disbelieve Amazon's numbers. It's hard to imagine why a company like that would want to fudge the numbers -- though accounting software can be fallible or wrongly programmed.

Even with all the Amazon reports, it is rare that I as a small publisher have time to go over individual report.

I imagine that if you suspect foul play, an individual author can buy a number of ebook copies himself and compare against weekly sales reports. Obviously, that costs money, but ebooks are typically low-volume areas, so you probably could see sales jumps pretty easily.

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