§ 1571.Examination Person Believed to Be Holder Who Has Failed to Report Property

This section supplies the Controller's main audit tool for finding holders who aren't reporting property they should be. When the Controller has reason to believe a person has failed to report as this chapter requires, the Controller may examine that person's records, though only at reasonable times and after reasonable notice, not on demand and not without warning.

Rather than always sending state auditors directly, the Controller can ask an agency that already regulates the holder to run the examination instead. Banks and savings associations get special mention: the Commissioner of Financial Protection and Innovation has full authority to examine records of any banking organization or savings association doing business in California, even ones organized elsewhere. Because the Controller increasingly relies on outside contractors to perform these audits, the section also requires public hearings before the Controller adopts guidelines controlling how third-party auditors operate, and separate guidelines, in place since 1999, spelling out how a holder can dispute or appeal what an examination turns up.