Detecting Internal Fraud Before It Reaches the Audit Committee
By the time internal fraud reaches an audit committee it is usually years old and structurally embedded. The indicators were there far earlier, in places most control frameworks do not look.
The financial indicators worth monitoring
Round-sum payments. Suppliers activated shortly before a large award. Invoice values sitting just below an approval threshold. Credit notes concentrated in one cost centre. Margin anomalies that survive every explanation offered for them.
Individually each is innocuous. What matters is co-occurrence — three of these in the same cost centre in the same period is worth a conversation.
The behavioural indicators nobody logs
The employee who never takes leave. The manager who insists on personally handling one supplier relationship. Reluctance to accept a rotation. Visible spending well beyond a known salary band.
These are not evidence and must never be treated as such. They are reasons to look at the numbers properly, and the numbers either support them or they do not.
The controls that actually catch it
Mandatory leave with a genuine handover, enforced. Supplier master-data changes reviewed by someone with no procurement authority. Payment-run exception reporting that a human actually reads. Separation between who selects a vendor and who approves their invoices.
None of this is novel. It is unglamorous, and it is the reason most schemes we investigate ran in organisations where one of those four had lapsed.
If you do suspect something
Do not confront. Do not put it in an email. The most common way evidence is destroyed is a well-meant early conversation that alerts the subject.
Preserve access logs and records first, take advice on privilege, and let the investigation be built to a standard that survives cross-examination — because if you are right, it will have to.
Detection is not primarily an analytics problem. It is a willingness problem: most of these indicators were visible to somebody who decided it was not their place to ask.