American International Group, the insurer under investigation for improper accounting, may have understated workers’ compensation premiums to avoid paying millions of dollars to state funds, regulators said yesterday.

AIG, the world’s largest insurer, will be audited to determine whether it failed to report all of the workers’ compensation premiums it collected over more than a decade, New York Attorney General Eliot Spitzer said in a statement. By understating the size of its business, AIG may have been skirting payments to state funds that finance New York’s workers’ compensation board and some benefits for injured workers.

The audit is the latest leg of Mr. Spitzer’s investigation, which began in October with bid-rigging and expanded to accounting abuses in reinsurance transactions. New York-based AIG is expected to correct its accounting by May 2 after saying last month that it may have inflated its net worth by $1.7 billion over 14 years.

“It goes to show that we have not hit bottom yet,” said Stuart Quint, an analyst at Gartmore Global Investments in West Conshohocken, Pa., including more than 780,000 AIG shares. “It sounds like there are still many things that regulators are examining.”

Shares of AIG fell 69 cents to $51.07 yesterday in New York Stock Exchange composite trading. The stock has fallen 30% since the company said it had received accounting subpoenas on February 14.

Mr. Spitzer and New York Insurance Superintendent Howard Mills said AIG may have understated its workers’ compensation business by classifying some workers’ compensation premiums as general liability premiums. The company may have continued to misreport even after company “insiders” challenged the practice’s legality, the regulators said.

The practice in question “largely had been corrected by 1997,” AIG spokesman Chris Winans said. “As we have said in the past, on all regulatory matters we are committed to being as cooperative as possible,” he said, declining to comment further.

One company document from the early 1990s estimated AIG reaped annual benefits of tens of million of dollars, regulators said. Mr. Spitzer, who is running for New York governor in 2006, said the audit will determine whether the company owes money to the state.

The state’s workers’ compensation board manages four funds that are financed in part by insurance companies, board spokesman Jon Sullivan said.

Ernst Csiszar, the former insurance commissioner of South Carolina, said insurers have misreported workers’ compensation premiums in the past.

“We would set up regular audits to make sure the numbers they were reporting to the pools were the real numbers,” said Mr. Csiszar, who is now president of the Property Casualty Insurers Association of America, a trade group. “You would find irregularities. The assessments were a real bone of contention with insurers.”

AIG’s reinsurance accounting tricks have cost the company its AAA credit rating, and led to last month’s ouster of Maurice “Hank” Greenberg, 79, as chairman and chief executive.

An internal accounting review has uncovered at least $1 billion more in accounting errors since the March 30 disclosure, the New York Times reported yesterday, citing unidentified people briefed on the company’s probe. Mr. Winans declined to comment on the Times report.

The company’s biggest supporters, the analysts who recommend buying the stock and the investors who own it, expect the stock to languish until the insurer fully reports details of the improper accounting.

The extra yield investors demand to hold the company 4.625% notes maturing in 2009 over government debt widened by 3 basis points to 68 basis points, according to Trace, NASD’s bond reporting system.