The auditor has a tight schedule and a stack of files. If your records are a mess, the auditor fills the gaps with assumptions, and the assumptions never go in your favor. Use this workers’ comp audit checklist to have everything ready before the appointment.
Before the audit
- Confirm the policy period being audited. It is rarely the calendar year.
- Read the policy. Know which class codes are on it and who is included or excluded.
- Decide who will meet the auditor. Pick someone who knows the payroll and the work.
- Call your agent. A good agent reviews the numbers with you before the auditor does.
Payroll records
- Payroll journal or summary for the policy period, by employee
- Federal Form 941s covering the period
- State unemployment reports
- W-2s and 1099s if the period matches the calendar year
- Overtime shown separately, by employee and by classification
- Severance, tips and other payments that may be excluded, shown separately
Classification records
- A list of employees with job titles and what each one actually does
- Payroll broken down by class code
- Clerical, outside sales and drivers separated from the governing class
- Time records for employees who split time between jobs, where your state allows payroll to be divided
Owners and officers
- Names, titles, duties and ownership percentages
- Whether each one is included or excluded on the policy
- What each one was paid
Subcontractors
- A list of every subcontractor paid during the period, with amounts
- A certificate of insurance for each one, covering the dates of the work
- Contracts or invoices showing labor and materials separately
Missing certificates are the number one cause of surprise audit bills. See how subcontractors and 1099 workers are treated at audit.
Accounting records
- General ledger
- Cash disbursements journal or check register
- Sales or gross receipts, if the auditor requests them
During the audit
- Answer the questions that are asked. Do not volunteer more.
- Ask the auditor to recap the findings before leaving.
- Ask for a copy of the audit worksheets.
After the audit
- Compare the audit to your own numbers before you pay.
- Check class codes, excluded payroll and subcontractor charges.
- Dispute errors in writing, with documents.
For the reasons behind each item, read how a workers’ comp audit works and the 13 costly mistakes employers make on audits.