Frequently Asked Questions
Find answers to frequently asked questions about premium audits.
An insurance premium audit is a provision of your policy contract.
The purpose of the premium audit is to develop actual exposures that are properly classified in accordance with manual rules and regulations. This information is used to determine your final premium.
Most states require premium audits to confirm the final premium and to ensure accurate data for deciding rates.
Depending on the policy type, the auditor will need access to documents that relate to the policy.
This may include state and federal unemployment tax returns, payroll journals, individual earning records, general ledger, cash disbursements journal, check register, certificates of insurance, and financial statements such as profit and loss statements, income statements, balance sheets, trial balances and tax returns.
Keeping complete and accurate records helps your business will make the audit process much easier.
CPAudits takes the utmost care to protect your information by using advanced security and encryption technology. We do not share your information with anyone other than your insurance carrier.
If you want your insurance agent to have a copy of the audit report in the event that they request it, please indicate “Yes” in the section of the audit where we ask whether you grant us permission to release worksheets to your agent.
An auditor will review your financial documents for all potential exposures which include employees on your payroll. You may also be required to provide documentation that includes exposure for uninsured subcontractors and 1099 contract employees.
A contract worker is someone who performs services for a company, whose payments is usually reported on a form 1099 to the IRS, and who is not on the company payroll.
Exactly who would be considered an employee or an independent contractor for workers compensation purposes is different from the IRS and differs from state to state.
Audits help ensure that insurance premiums are aligned with the businesses and activities they are designed to cover.
As businesses change, policies need to change with them. Audits are performed after your policy has expired to determine the actual exposure.
With information obtained from the audit to accurately reflect the state of your business over the policy term, your carrier can properly adjust the premium for your policy.
Depending on your state and policy type, audits can be required by state insurance regulations and are common industry practice.
In a standard workers compensation policy, Part V, Sections F and G relate to the audit process. These sections give the insurer the right to examine any and all records necessary to determine the proper premium.
In a general liability policy, Part IV, Section F relates to the audit process. This section gives the insurer the right to examine any and all records necessary to determine the proper premium.
If CPAudits has been contracted by your insurance company to perform audits for them and report the results, then we are legally authorized to collect this information from you.
Depending on your state, the location of these clauses in your policy may vary.
Please indicate actual job duties, not job titles. Be as specific as possible and avoid general terms such as “does everything,” “runs the company,” “management,” “executive” or “clerical.”
For clerical employees, please indicate their actual duties, for example, reception, accounting, bookkeeping, data entry, and phones.
Your insurance company will determine the outcome for any company not completing its audit. CPAudits recommends that you discuss possible outcomes with your agent or broker.
Audit Completion Guide
Follow these steps to ensure a smooth audit process.
- Gather the necessary documents
Depending on the policy type, the auditor will need access to documents that relate to the policy being audited.
The documents needed will be outlined in the letter sent out by CPAudits.
Necessary documents may include state and federal unemployment tax returns, payroll journals, individual earning records, general ledger, cash disbursements journal, check register, certificates of insurance, and financial statements such as profit and loss statements, income statements, balance sheets, trial balances and tax returns.
If CPAudits has been contracted by your insurance company to perform audits for them and report the results, then we are legally authorized to collect any relevant information from you. - Upload, fax or mail the documents
It is recommended that all audit documents be uploaded through the secured portal address printed on each audit letter or through the audit login link below.
Documents may also be sent by email, fax or mail. If you choose to mail the documentation, be sure to submit copies of your documents only. CPAudits does not mail back original documents unless the insured has provided a paid label for return.
For security purposes, documentation will not be accepted in person and must be mailed, faxed, emailed or uploaded to the CPAudits website.
Documents can be sent to support@cpaudits.com, faxed to (888) 928-9272, or uploaded to our secure website. - Be available for follow-up
In an effort to more completely understand your business, our audit staff may need a person to contact who would have sufficient knowledge of the business including the job responsibilities of employees.
While accountants and attorneys are able to provide requested audit documentation, our auditors may need to follow-up with additional questions to assure that they fully understand your business operations.
Document Checklist
- Payroll journals/registers
- Employer’s Quarterly Federal Tax Return Form 941 or 943 reports
- State Employer’s Quarterly Unemployment Insurance Tax reports
- Federal 1099, W2 and W3 transmittals
- General ledger/trial balance
- Financial statements
- Check register/canceled checks/bank statements
- Contractor/subcontractor records
- Job cost records/contracts/work invoices
- Certificate of Workers’ Compensation and/or General Liability Insurance for all subcontractors
- Benefit Plan information such as cafeteria or 401(k) plan wages
- Overtime wages summarized by classification
- List of clerical employees and duties
- Other miscellaneous business records
Need help completing an audit?
If you need help completing an audit, please send us a message or call our customer service line.
If we are unavailable, please leave a message with your name and file number or control ID number found on your audit letter and we will return your call as soon as possible, typically within one business day.