Internal audit functions are meant to be an organisation safety net yet when they fail the results can be catastrophic. Many organisations in the Kingdom of Saudi Arabia rely on an internal audit firm to provide independent assurance and to detect control breakdowns before losses escalate. However, gaps in scope, outdated techniques and weak escalation practices turn good intentions into blind spots that allow fraud waste and operational failures to grow into major losses.
1. Narrow or outdated audit scope that misses evolving risks
When audit plans focus only on traditional financial controls and neglect emerging risk areas such as procurement fraud cyber exposures and sustainability reporting the function misses the very risks causing the biggest losses today. Internal audit teams that do not use data analytics or continuous monitoring often detect problems months after they occur. The PwC Global Economic Crime Survey shows procurement fraud remains among the top three most disruptive types of economic crime experienced by organisations over the previous 24 months and many companies still underuse analytics to detect it.
2. Weak fraud detection culture and reliance on after the fact discovery
Organisations that depend mainly on reactive processes lose far more than those that embed proactive detection. The Association of Certified Fraud Examiners found that 43 percent of occupational fraud cases were detected by tips and that typical fraud schemes persisted about 12 months before detection. When internal audit teams do not encourage whistleblowing, protect reporters or actively test for collusion the average loss per case rises dramatically. Building a strong tip management process aligned with audit testing is essential to reduce the time to detection and the median loss per case.
3. Collusion and complex fraud schemes that bypass controls
A substantial share of modern frauds involve collusion among two to five people which weakens traditional segregation of duty controls. Regional studies in MENA show that more than half of frauds involve some level of collaboration and that asset misappropriation and procurement schemes are common. Internal audit teams must therefore adopt techniques that detect unusual vendor behaviour, complex transaction structures and related party anomalies rather than relying solely on checklist testing.
4. Insufficient coverage of third party and procurement risk
Procurement fraud is a leading cause of loss for organisations globally. Weak vendor onboarding, poor contract governance, phantom invoicing and conflicts of interest create large exposures that internal audit often examines only superficially. The PwC survey and other industry research highlight that many organisations do not apply data analytics to procurement or vendor payment streams which leaves duplicate or fraudulent payments undetected for long periods. Robust supplier due diligence transaction level analytics and targeted procurement audits reduce this exposure.
5. Gaps in IT and cyber audit capability
Losses that begin as cyber incidents often translate into financial loss, regulatory fallout and reputational damage. When internal audit lacks the technical skills to assess cyber controls cloud configuration and identity management the organisation loses a primary independent line of defence. The 2025 internal audit guidance from major firms emphasises that audit plans must integrate cyber assurance and that audit committees expect deeper coverage in 2025 and beyond.
6. Limited use of continuous auditing and advanced analytics
Traditional point in time audits miss patterns that reveal long running schemes. Continuous auditing tools and analytics applied to accounts payable payroll procurement and journal entries reveal anomalies that human sampling would not. Studies show that organisations which deploy analytics reduce the average time fraud persists and detect larger shares of loss earlier. Yet many internal audit functions remain reliant on sampling because of skill gaps or tool limitations. Investing in analytics and training is no longer optional.
7. Poor alignment with risk management and slow remediation tracking
Even when an internal audit identifies significant control failures the true loss multiplies if management does not act promptly. Audit reports that sit without remediation timelines and verification allow the same deficiency to produce repeat losses. Effective internal audit functions integrate with risk and compliance to ensure remediation plans are clearly prioritized and validated. Audit committees expect evidence of closure and impact measurement.
8. Overlooked insider risk and leadership driven fraud
Research indicates that although many perpetrators are employees, executive level fraud is far costlier when it happens. Owner or executive led fraud yields higher median losses when compared to employee level schemes. Internal audit must therefore apply professional scepticism to senior management conduct and financial transactions that could conceal wrongdoing. Transparent reporting lines and external escalation paths help address the difficult governance choices this presents.
9. Inadequate staffing skills and lack of independence
A high performing audit function combines domain expertise, analytics capability, technology skill and independence. When audit teams are thinly staffed or lack required competencies they cannot test complex controls or follow sophisticated schemes. In some cases the audit committee must consider co sourcing or external quality reviews to bolster capability and independence. Engaging with an internal audit firm for targeted skills transfer is a practical route to stabilise capability quickly.
10. Regulatory change and reporting obligations ignored until late
The pace of regulatory change in areas such as anti money laundering sanctions and sustainability reporting means controls must evolve quickly. Organisations that treat regulatory compliance as a box checking exercise often face fines, remediation costs and reputational damage. Internal audit has a strategic role to assess readiness for new requirements and to test the operational controls that deliver compliance. Recent regional guidance urges audit committees to prioritise these changes in 2025.
Quantitative context and recent figures for 2025
Recent global and regional surveys provide a stark picture of exposure in 2024 and early 2025. The ACFE 2024 report found that the median loss per occupational fraud case exceeded 1.5 million US dollars and that schemes typically persisted about 12 months before detection. The PwC Global Economic Crime Survey 2024 highlights procurement fraud as one of the top three disruptive economic crimes experienced by firms over the prior 24 months. A KPMG study specific to MENA in 2025 noted that around 55 percent of frauds involved some form of collaboration and that asset misappropriation accounted for over half of reported fraud types. These figures show the scale of loss when internal audit and related controls are not focused on evolving threats.
Practical steps to prevent loss and strengthen audit impact
- Expand audit scope to include procurement cyber third party and sustainability risk using a risk based methodology.
- Deploy continuous auditing and analytics for accounts payable payroll procurement and journals.
- Strengthen whistleblower channels and ensure tips are triaged and integrated into audit testing.
- Increase senior management transaction reviews and implement independent escalation to the audit committee.
- Build cyber assurance into every audit plan and upskill audit staff in cloud and identity related risks.
Organisations in the Kingdom of Saudi Arabia that partner with the right advisers and that treat internal audit as a strategic assurance line will limit losses and build resilience. Consulting companies in Riyadh play a vital role by providing local insight, global best practice and hands-on capability building to accelerate improvements.
Measuring success and reporting to stakeholders
Success means fewer incidents, shorter detection times and smaller median losses. Track metrics such as time to detection remediation completion rate, number of control failures by category and loss per incident. Present these metrics to the audit committee with clear trends and root cause analysis so the board can prioritise investments in controls people and technology. Benchmarking against regional peers and using external studies helps set realistic targets for 2025 and beyond.
Conclusion and next steps for KSA organisations
Internal audit is a cornerstone of loss prevention yet it must evolve quickly to meet modern threats. Addressing narrow coverage, weak detection channels, data limitations and governance gaps will materially reduce the size and frequency of losses. Organisations should evaluate capability gaps, consider co-sourcing with experienced providers and adopt continuous auditing and analytics as part of a modern assurance model. Consulting companies in Riyadh can provide practical local experience and help build sustainable programs that match Saudi regulatory expectations and Vision objectives.
For organisations ready to strengthen assurance and reduce financial loss contact insight advisory for a tailored readiness assessment and a practical roadmap to modernise your internal audit capability. Consulting companies in Riyadh including specialist providers can support implementation and skills transfer to ensure lasting improvement.
Finance Advisory 