Issue 05 · Producer Perspective

The Statement Audit Process: What Actually Happens When Your Royalties Get Audited

It is not an accusation and it is not a lawsuit. It is a grid, a diagnosis, and then a chase.

By Dan Montano · 2026-10-19 · 6 min read

There are two very different things people call an audit, and you should know which one you are talking about:

• The desk audit. Someone builds your full placement list, scores every song, matches it against every statement, and works the gaps with the label's royalty department. This is where nearly all recovered money comes from.
• The formal audit. The contractual right in your agreement to send an independent CPA into the label's books. Powerful, expensive, and almost always the last step, not the first.

This article walks through both, in the order they actually happen.

Where does an audit start?

Not with the label. With you.

Week one is the grid. We build the placement list: every song you have ever been credited on, pulled from your agreements, your emails, and your credits, not from memory. Then every song gets scored on four columns: the song, the agreement, the LOD, and the statement.

• Is the agreement fully executed, or partially executed and one signature short?
• Is the Letter of Direction on file and approved at the label, or just signed and sitting in your inbox?
• Are statements actually arriving, or nothing?

Week two is the plan. Every missing cell in that grid is possible missing money, and each one becomes a case with a number, an owner, and an action step. What gets chased first is usually the biggest catalog with the cleanest agreements, and whatever has to be signed before anything else can move.

What does an audit usually find?

The same failures, over and over. Across thousands of accounts, these are the ones we see weekly:

• Agreements the client swore were signed sitting at partially executed, one signature short.
• LODs that list four songs when the agreement covers six. The label pays on the four.
• Royalties flowing to an old manager's bank account. We see this about once a week. Check yours.
• Money accumulating at the label under "unmatched" because a legal name was spelled two different ways.
• Stale banking information, an old address, or a tax form that was never sent back.
• Statements that simply stopped: a period gap, a vanished territory, a missing DSP, or a rate escalation that was never applied.

Notice that almost none of these are the label calculating wrong. The money you are missing is usually absent from the statement, not wrong on it. That is why the grid matters more than re-adding the math.

What happens after the findings?

The chase. This is the part nobody sees, and it is the actual work:

1. Fix the documents first. Get the missing signatures, deliver the LOD to the label's royalty department, and confirm the payee setup. Nothing else moves until this is done.
2. Request the account history from inception to date, in writing, with the account number and the exact periods in question. Specific requests get worked. Vague requests get ignored.
3. Open tickets and follow up on a schedule, always by email, so every request has a date on it. A dozen follow-ups per case is normal. Cases going quiet in business affairs for weeks is normal. Quiet is not stalled.
4. When a payout is approved, ask for an out-of-cycle payment so the money moves now instead of waiting for the next statement window.

What that looks like when it works: one client came to us with a lawyer, a manager, and three albums past two and a half billion combined streams, all assured everything was being collected. In eight months we went through twenty-five producer agreements and ninety-two email threads across four record labels and recovered $879,000 in back royalties that had been sitting uncollected. In another case, EMPIRE released over $400,000 that had been accumulating for five years. Nobody was hiding that money. Nobody was looking for it either.

Where does the clock come in?

Your agreement's accounting section almost certainly says a statement becomes binding if you do not object in writing within a set window, commonly one year, sometimes two or three. Some agreements start that clock when the statement should have been sent, even if it never arrived.

So while the chase runs, watch the window. If a disputed statement is approaching its deadline, send a written objection before it closes. You can object and keep working the case cooperatively at the same time. Objecting is not declaring war. It stops the clock.

When does a formal audit make sense?

When the desk audit has documented a real discrepancy, the royalty department will not resolve it, and the money at stake justifies the cost. Typical audit rights run once per year, on thirty days written notice, with an independent CPA at your expense. It is the escalation you hold in reserve, and the written record you built during the chase is what makes it credible.

How long does this take, and what does it cost?

Months, not days. The recoveries we publish took five to eight months, and those went well. Estates, vendor setups, and business affairs departments move on their own schedules, and nobody can speed up a court or an estate.

On cost: we work on a percentage of what we collect. No recovery, no fee. And the honest limits apply to any auditor you hire: an audit cannot make an unrecouped record recoup, it cannot collect on a deal that was never signed, and it cannot force a label to move faster than its process allows. What it can be is organized, persistent, and impossible to ignore.

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