Responding to an unclaimed property audit notice: What to do first

When an audit begins, you will typically need support from multiple functions across your organization–often spanning finance, operations and corporate support teams. Identify a core set of contacts early and confirm who will be responsible for producing records, answering questions and approving responses. Establish a simple intake and tracking process for auditor requests, set expectations for turnaround times and plan for additional bandwidth as information requests expand over the life of the audit.

Unclaimed property audits may involve a single jurisdiction or can include multiple jurisdictions. Early in the process, confirm the audit’s current scope and participation, including the specific jurisdictions involved and the effective periods under review. Because scope can change over time and communications may arrive through multiple channels, make it a priority to centralize audit correspondence and maintain a clear record of all correspondence and authorization letters received.

As the audit proceeds, the auditor will typically request information to determine which property types and legal entities will fall within scope of the review. To stay ahead, outline your likely areas of exposure based on your business operations, reporting history and identify where supporting records are maintained. This allows internal teams to prioritize early research and assemble relevant records before formal document requests become time-sensitive.

Before providing information, ensure that appropriate confidentiality protections are in place for the audit. This generally involves a non‑disclosure agreement which clarifies how your information may be used, stored or shared. Coordinate with your internal legal team to review and negotiate the terms before producing materials.

Start by confirming what historical records exist for the periods under review and how quickly they can be retrieved. Consider major system or process changes and your retention practices so you have a realistic view of what you can produce.

Expect requests for supporting materials that reconcile general ledger balances and activity back to source data. Plan to provide information in a consistent format and be prepared to explain how it was generated.

Finally, assess whether your records are detailed enough to research items, explain their status and document resolution. Where data sources do not fully align or older support is limited, document those limitations, align internally on a consistent explanation, and involve the right stakeholders before producing large volumes of information.

If some periods have limited or incomplete records, the audit process may involve estimation to address those gaps. In some cases, management may be asked to confirm record availability through a signed management representation letter, so document your assessment carefully and ensure it is internally reviewed.

To effectively prepare for an audit, it is essential to collaborate with all departments that may generate or manage unclaimed property and understand both their current and historical procedures. As you map these processes, look for areas where items may be cleared, reclassified or closed without a clear audit trail showing how the underlying obligation was resolved, and document your findings so you can address questions consistently.

Pay particular attention to how outstanding payments and credits are managed over time (for example, aging, voiding/reissuing, outreach, escheatment decision points and documentation standards). Confirm who owns each step, what triggers follow‑up and what evidence is retained to support resolution. Where practices vary by business unit, system or time period, capture those differences and consider whether additional controls or documentation would reduce audit risk.

Consider engaging qualified advisors with experience in unclaimed property audits to help you navigate the examination process. Such experts advise holders on effective strategies for responding to information and document requests, conduct risk assessments, manage communications with auditors and assist with gathering and organizing records. If the company expects potential legal challenges during the audit, it may be beneficial to engage outside legal counsel and involve advisors through a Kovel arrangement.

One of the most effective ways to prepare is to review your books and records alongside current and historical procedures to identify potential unclaimed property exposure. Focus on areas where aged or unresolved items may be cleared, reclassified or left without sufficient support, and confirm that follow‑up and documentation practices are consistent. The earlier you identify gaps and address them, the easier it is to reduce risk.

If your review identifies unreported unclaimed property, consider coming forward through available voluntary compliance options. Many jurisdictions offer voluntary disclosure programs that allow you to report past‑due property with a waiver of penalties and interest. Some even provide audit indemnification. If a voluntary disclosure option is not available, or the amount to report is de minimis, a first‑time filing may be an appropriate alternative.

Once you begin filing, establish a reliable process to stay current going forward. Regular, well-documented reporting supports a consistent compliance posture and can help reduce audit risk. Reporting unclaimed property is legally required, and some states require a report even when no property is due (a ‘negative report’). Others strongly encourage negative reporting as these filings demonstrate awareness of escheatment obligations even when no property is reportable.

Once you begin filing, establish a reliable process to stay current going forward. Regular, well-documented reporting supports a consistent compliance posture and can help reduce audit risk. Reporting unclaimed property is legally required, and some states require a report even when no property is due (a ‘negative report’). Others strongly encourage negative reporting as these filings demonstrate awareness of escheatment obligations even when no property is reportable.