System Audit and Fraud Detection in Integrated Safeguards

As part of work to examine options for the integration of safeguards, a study has been undertaken of how the IAEA might make greater use of safeguards activities already being performed by suitable Regional and State Systems of Accountancy and Control (R/SSACs). It is suggested that a 'system audit' is performed by the IAEA on candidate R/SSACs to confirm that a technically sound State or Regional system is in place. Importantly, the suggested approach also involves the use of fraud detection techniques and measures to address the possibility of 'cheating' by the R/SSAC (e.g. through the deliberate falsification of accountancy records). A case study is presented; based on the use of targeted and random IAEA inspections coupled with increased analysis of accountancy data. Parallels are drawn with current audit practice in other industries (such as the financial sector). The paper concludes that, particularly for nuclear materials of low-proliferation concern, system audit of suitable R/SSACs bolstered by robust fraud detection techniques could enable the IAEA to draw safeguards conclusions concerning the non-diversion of nuclear material with sufficient confidence and at lower cost.