You can't investigate every transaction or audit every department. What you can do is systematically track the patterns that precede fraud.
This template gives your team a structured framework for monitoring fraud indicators across operational, financial, and behavioral domains. Use it to score risk concentrations, prioritize investigation resources, and build evidence for control improvements.
Purpose of the Template
This assessment template helps fraud risk managers and internal audit teams:
- Document and score fraud indicators consistently across departments
- Identify risk concentrations that warrant deeper investigation
- Support quarterly risk assessments with quantifiable indicator data
- Build a defensible record for control enhancement requests
The template separates indicators into three domains: financial anomalies, operational patterns, and behavioral signals. Each indicator gets a frequency score, impact rating, and investigation status. You're not proving fraud exists; you're identifying where your controls need attention.
Prerequisites
Before deploying this template, ensure you have:
- Access to general ledger data, inventory records, and vendor payment files
- Permission to review employee complaint logs and HR records (coordinate with legal on privacy boundaries)
- A defined escalation path for high-scoring indicators
- Baseline metrics for normal operational variance in your environment
If you don't have automated transaction monitoring, you'll need to extract monthly samples manually. The template assumes you can pull accounts payable aging reports, inventory variance reports, and adjustment entry logs.
The Template
FRAUD INDICATOR ASSESSMENT TEMPLATE
Assessment Period: [Month/Quarter]
Prepared By: [Name, Title]
Review Date: [Date]
---
DOMAIN 1: FINANCIAL ANOMALIES
Indicator: Excessive Inventory Shrinkage
Description: Variance between physical count and book value exceeds [X]% threshold
Frequency This Period: [Daily/Weekly/Monthly/Isolated]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [Attach variance reports, trend analysis]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
Indicator: Multiple Payments to Same Vendor
Description: Duplicate invoice numbers or near-duplicate amounts processed within [X] days
Frequency This Period: [Count of occurrences]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [List vendor names, invoice numbers, amounts]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
Indicator: Spikes in Invoice Volume
Description: Invoice volume exceeds rolling 90-day average by [X]%
Frequency This Period: [Count of departments/vendors affected]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [Attach volume trend charts]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
Indicator: Excessive Adjusting Entries
Description: Journal entries to correct previous periods exceed [X] per month in single department
Frequency This Period: [Count by department]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [List entry dates, amounts, approvers]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
---
DOMAIN 2: OPERATIONAL PATTERNS
Indicator: Missing Documents
Description: Critical records (vehicle registration, checkbooks, inventory reports) reported missing
Frequency This Period: [Count by document type]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [List missing documents, last known location]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
Indicator: Frequent Complaints About Personnel/Processes
Description: Repeated complaints about specific employee or department process
Frequency This Period: [Count by subject]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [Summarize complaint themes without PII]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
---
DOMAIN 3: BEHAVIORAL SIGNALS
Indicator: Unexplained Lifestyle Changes
Description: Employee displays spending patterns inconsistent with known compensation
Frequency This Period: [Count of reports]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [Source of observation, no financial details]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
Indicator: Financial Distress Indicators
Description: Garnishment notices, debt collection calls to workplace, or disclosed financial pressure
Frequency This Period: [Count of employees]
Impact Rating: [Low/Medium/High/Critical]
Supporting Data: [HR documentation reference only]
Investigation Status: [Not Started/In Progress/Closed]
Notes:
---
RISK CONCENTRATION SUMMARY
High-Priority Indicators (3+ occurrences or Critical impact):
1.
2.
3.
Departments With Multiple Indicators:
1.
2.
Recommended Actions:
[ ] Increase transaction sampling in [department]
[ ] Request access logs for [system]
[ ] Schedule unannounced inventory count
[ ] Escalate to [role] for investigation
[ ] Enhance segregation of duties in [process]
Next Review Date: [Date]
Customizing the Template
Set your thresholds based on operational norms. If your inventory shrinkage historically runs at 2%, don't trigger alerts at 2.5%. Set the threshold where variance becomes statistically unusual for your business. Review six months of baseline data before you define "excessive."
Adjust impact ratings to your risk appetite. A payment processing firm might rate duplicate vendor payments as Critical due to transaction volume. A manufacturing company with slower payment cycles might rate the same indicator as Medium. Your impact scale should reflect actual exposure, not generic severity.
Add industry-specific indicators. If you operate retail locations, add indicators for refund patterns or discount overrides. If you process high-value B2B transactions, add indicators for unusual payment terms or off-cycle invoicing. The template covers common indicators; your environment will have unique risk concentrations.
Define investigation triggers. Decide in advance: does a single High-impact indicator warrant investigation, or do you need two Medium-impact indicators in the same department? Document your escalation logic so the template drives consistent action, not ad-hoc responses.
Coordinate with HR and legal on behavioral indicators. Monitoring lifestyle changes and financial distress requires clear policies on what you can observe, document, and act on. You can note that an employee receives debt collection calls at work (observable fact). You cannot access their credit report without consent. Keep your observations to workplace conduct and disclosed information.
Validation Steps
After you complete your first assessment:
Cross-reference with transaction monitoring alerts. If your monitoring system flagged duplicate payments but your template assessment shows zero occurrences, either your data extraction is incomplete or your threshold is too high.
Test your escalation path. Submit a sample high-priority indicator summary to your designated escalation contact. Confirm they receive it, understand the format, and know what action they're expected to take.
Review with internal audit. Share the template with your audit team before the next examination cycle. They'll tell you if your indicator selection aligns with their testing procedures or if you're missing patterns they routinely investigate.
Track investigation outcomes. After 90 days, review which indicators led to control improvements, policy changes, or confirmed fraud. If an indicator consistently scores high but investigations find benign explanations, recalibrate your threshold or remove it from the template.
Validate your baseline assumptions. If you set inventory shrinkage alerts at historical average plus 20%, verify that your historical data didn't already include fraud losses. A baseline contaminated with undetected fraud will set your thresholds too high.
Run this assessment monthly for high-risk departments, quarterly for standard operations. The template's value isn't in catching fraud directly; it's in showing your executive team and auditors that you're monitoring the right signals with documented consistency.
