A workers' comp audit can seem intimidating, but it doesn’t have to be. It’s a standard process used by insurance companies to ensure that businesses are accurately reporting their payroll records, employee classifications, and insurance details in line with workers’ compensation law.

Audits ensure that you’re paying the correct workers' compensation insurance premiums, and that all injured workers receive proper coverage if something goes wrong. With the right prep, you’ll not only pass with confidence, but also protect your business from penalties, back payments, and red flags.

Why Workers' Comp Audits Happen

Audits are triggered by your insurance provider (or sometimes the State Fund) at the end of your insurance policy term. They’re meant to verify that your initial wage and employee estimates match actual data. These audits are essential to maintain accurate Workers’ Compensation Coverage, prevent insurance premium fraud, and uncover suspected non-compliance.

In California, Workers' Compensation Insurance Compliance is strictly enforced, especially if your business hires from a temporary employment agency, uses independent contractors, or operates in high-risk industries like construction.

Some audits are also initiated when employers are flagged through programs like Construction Policy Tracking or referrals to the Uninsured Employer Fund.

What Happens During a Workers’ Comp Audit

Here’s what you can expect during the audit:

• A detailed review of payroll records, employee roles, and classification codes

• Verification of Certificates of Insurance for contractors or agencies

• Proof of medical treatment provided to injured employees

• Documentation of disability insurance claims

• Status checks for corporate officers, federal workers, and exempt personnel

• Review of any Group health plans used in lieu of standard coverage

The auditor may also inspect your systems for audit trails and confirm your use of compliant payroll software. If you’ve received a notice labeled Report Suspected Non-Compliance, it’s a signal that something in your reporting raised a concern.

Common Triggers for Audits

Businesses are more likely to face audits if they:

• Underreport payroll or overtime

• Misclassify employees into lower-risk roles

• Submit late or missing COIs from staffing agencies

• Fail to disclose occupational disease claims

• Show gaps in Workers' Compensation Insurance Compliance

• Receive complaints via fraud hotlines or employee reports

How to Prepare for an Audit (and Pass It)

1. Organize Your Payroll and Employee Records

Include hours, wages, job titles, and employee classification details. Make sure everything matches what you reported to your insurance agent.

2. Confirm Your COIs Are Legit

Use CheckMyCert.org to verify any COIs from staffing firms or contractors. Their fraudulent COI detection system helps you avoid liability if an agency isn’t actually insured.

3. Review Class Codes and Risk Assignments

Double-check that high-risk roles (e.g., field workers) aren’t coded as low-risk (e.g., clerical). Misclassification can lead to insurance coverage disputes and premium adjustments.

4. Track Benefits and Claims

Keep documentation on medical treatment, disability insurance, and benefits provided to injured workers under your plan.

5. Assign a Contact Person

Designate someone with deep knowledge of your payroll system, workers’ compensation insurance, and audit history to speak directly with auditors.

Mistakes That Could Cost You

• Failing to maintain audit trails for past policies

• Using expired or forged COIs

• Not reporting compensation for corporate officers or independent contractors

• Missing documentation for occupational disease claims

• Delaying response to a Report Suspected Non-Compliance notice

• Submitting incomplete wage records or ignoring classification code rules

Why CheckMyCert Is a Must-Have Tool

Your audit can quickly go sideways if your staffing agency’s COI turns out to be fake. That’s why using CheckMyCert.org for fraudulent COI detection is one of the best fraud prevention strategies available.

This free, confidential service gives you peace of mind before the auditor ever walks in the door. It's your first line of defense against someone else’s non-compliance becoming your legal liability.

Final Thoughts - Confidence Comes from Compliance. A workers’ compensation audit isn’t the enemy, it’s an opportunity to prove that your business is compliant, organized, and ethical. But if you’re not prepared, it could cost you time, money, and trust.

Take the First Step Now!

📄 Upload any staffing COIs to CheckMyCert.org
🔍 Fast, free, confidential verification to protect against staffing fraud
📞 Need help? Contact us for support and next steps
🛡️ Pass your audit with confidence. Compliance is your best protection.