A work comp audit is the examination of the books or records of a policyholder, or insured, to determine the accuracy of the estimated policy premium. The actual premium basis and exposure are reconciled after the policy expiration date against the estimates used to establish the actual earned premium for the policy. A year-end final audit is really a verification of the exposure of a policyholder to determine the final premium to be charged since the original quote was based on estimated payroll only.
It is worth noting that Pay As You Go Workers Compensation policies help reduce exposure to large audit balances because the premiums are based on actual payroll and reported/paid in real-time, verses traditional estimated payroll programs.
Audits are almost always conducted after each policy period ends or expires. After the audit has been completed, the insurance carrier will send a Final Audit Statement to the policy holder. This statement will indicate if any additional premium is owed by the insured or if any credits need to be returned or applied to the next policy. Typically, these credits or debits are caused by payroll adjustments made by the auditor when conducting the year-end audit.
Take a look at the information about your company that is readily available to the auditor, such as your company website and other online information. Remember, it is likely the auditor will be looking at this information in advance of his or her visit to your offices. If there is any information there that could be misleading or is out of date regarding your operations or the nature of your work, not only should you be correcting it, you should also be prepared to clarify the changes with the auditor.
You don't want incorrect, out-of-date, or misleading information to cause the auditor to make decisions that increase premiums improperly. It's normally easier to address such issues early rather than after the audit is done, although it can be important to maintain a cordial and professional relationship with the auditor while the audit is being performed.
Incorrect or misleading information online can cause an auditor to apply an incorrect classification and rate to the audit, increasing premiums unnecessarily.