The act of inspecting accounting books, electronic accounts and appropriate tax records to determine the actual exposures that occurred during a specific time period (policy period) in order to develop the correct premium. Be sure to visit the Workers Compensation Audit Section and other free resource areas of our website for more detailed information on workers compensation audits.
The Audit Process can sometimes be difficult for an employer. Most employers, when faced with a workers compensation audit, suffer an uneasy feeling mostly due to not knowing the process that will be followed. Most employers are uneasy about opening their books and having outsiders basically nosing around what they feel is their business. In fact the audit is one of the most important processes that an employer can go through in determining their actual cost for workers compensation coverage. It's the workers compensation audit process that ultimately determines the final cost of any workers compensation policy.
Workers comp audits may come in several forms. For smaller accounts, the self audit or phone audit may be performed. These simple audits require the most basic information. Most information for these audits are compiled by the employer or their bookkeeper or accountant and then sent to the insurance company auditor either by fax, email or snail mail. Once the insurance company receives this information they will probably verify it with some form of government documents like an IRS 941 or state wage and contribution report. The reason they use these forms is that they typically include all the factual information they need to conduct a simple, verified workers comp audit.
More complicated or larger accounts generally have their workers comp audits performed on site, a physical audit, where an auditor actually visits their place of work to review all pertinent records.