Workers' compensation premium is calculated from payroll, but payroll for a year that hasn't happened yet can only be estimated. The policy is issued on that estimate, and the audit is where the estimate gets replaced with fact.
The result can go either direction. A business that grew during the year usually owes additional premium; one that staffed up more slowly than planned often receives a credit. Neither outcome is a penalty — the premium is simply catching up to the business that was actually run.
Why it matters at audit
The audit sets the final premium for the expired term and usually informs the estimate for the renewal, so an error carries forward into the next policy period.