Welfare to work firm says it changed procedures after internal audit found potentially criminal or irregular activity by employees

Managers at A4e, the welfare to work firm at the centre of a fraud inquiry into some of its employees, were made aware of potential criminal or irregular activity at the company's offices across Britain as long ago as 2009, leaked documents disclose.

A 34-page internal audit identified dozens of incidents of potential fraud, "reputational risk" or suspected rule-breaking by staff in at least 12 of the company's offices where public money was claimed for placing long-term unemployed people into work.

In one paragraph that will be seized upon by critics of the company, auditors say the number of damaging incidents is so large that the company is open to claims of a "systematic failure" to stop the risks of fraud.

The disclosures will increase pressure on ministers to suspend A4e's contracts, worth £200m. Last month, the employment minister, Chris Grayling, said he would do so if there was evidence of systemic fraud in the company.

On Thursday evening, the Department for Work and Pensions (DWP) confirmed it had previously been informed of the report and received assurances at the time but declined to say why it had not launched its own inquiry.

It comes as a fifth person has been arrested in a police investigation into the company's Slough offices.

Auditors were asked in July 2009 to examine a sample of job outcomes claimed from across A4e's contracts. They contacted the company's top 20 recruiters in 16 of the company's offices.

In the report, auditors say that they have identified potential fraudulent or "irregular" activity in nine cases, and form-filling by staff – which is against the rules – in another nine cases.

"The audit has highlighted that potential fraudulent/irregular activity is not confined to one particular geographical area of the division and shows a potential systematic failure to mitigate the risk towards this behaviour at both an office and regional level," the report states.

In Rotherham, a recruiter was found to have been involved in two incidents of potential fraud or irregular activity – he was supposed to have found jobs for two jobseekers in a pub and a minicab firm. But auditors found that the number of hours worked in both cases had been amended on the forms.

In Norwich, a single recruiter was found to have been involved in three incidents of potential fraud or irregular activity. A job at a painting and decorating company had not been filled by an A4e client, but a form had been completed and a claim from government had been submitted; in a cleaning company, a form that said the recruit was to work for fewer than 16 hours had been replaced with another; and in another, the forms had not been completed before being claimed as a positive job outcome.

In Slough, where there is currently a police inquiry, auditors found job claim forms had not been completed.

In Woolwich, south London, the DIY retailer B&Q told A4e's auditors that they had not completed forms claiming to be from them and the company stamp on the form was "not correct".

"This is a potentially fraudulent claim and there is also potential benefit fraud being committed by the client," the report states.

The same named recruiter had claimed a job outcome for a jobseeker at the retailer Peacocks where the employer had signed the form presented to her but was apparently under the impression that this was to confirm a placement, not to confirm a permanent job. She also said she had not ticked a box saying that the job would last 13 weeks.

In Bridlington, an employer at a cafe had been asked to sign blank documents.

There were seven cases where auditors believed that the job outcomes posed "reputation risk" if the details were ever exposed to the public.

In Edinburgh, a named recruiter claimed a successful outcome after assigning a man to a job with the cleaning company Initial, even though he left after two hours blaming sore feet for his absence, and then did not return.

In Nottingham, a named recruiter placed a woman in a heavy lifting job in a residential home, despite the fact that she was 24 weeks pregnant and unable to do the work. The same recruiter placed a jobseeker into a job at Blue Arrow, the recruitment company, but auditors reported that Blue Arrow was under the impression they were signing a reference form, not a form that would potentially claim a "job outcome" from the government.

In 21 successful job outcomes analysed by the report, auditors identified other potential problems including occasions where staff filled in forms that were supposed to be completed by the employer.

"This is a practice that the audit team has noted in previous audit reports. From discussions with staff members previously it is felt there is 'nothing wrong' with completing missing information on this document," the report said.

Auditors examined 224 outcomes, and reported that 4% of successful job outcomes demonstrated potential fraud or irregular activity while another 3% demonstrated a "reputational risk" to A4e if details were ever to emerge in public.

In 14% of cases – or 32 successful job outcomes – auditors were unable to complete visits. In some cases the auditors were unable to locate either the company or the individual concerned. In 69% of claims, there were "no issues highlighted" by the audit.

The DWP is currently investigating a mandatory work activity contract with A4e in south-east England and has launched a separate and independent audit of its relationship with the company.

A spokesman for the DWP said the government and the work and pensions select committee had previously been made aware of the document, and the department later received assurances from A4e that it had not uncovered any major issues.

However, the spokesman declined to say whether it had launched its own investigations or whether it had accepted the company's assurances without further inquiries.

"When an allegation of attempted fraud was recently made we immediately announced a formal investigation of that allegation.

"While the internal A4e document relates to programmes delivered by the previous government, our investigation into current contracts will ensure the issues this report raises have been fully addressed," he said.

A fifth person has been quizzed as part of the fraud investigation surrounding the company. A 35-year-old woman was arrested on Thursday by appointment at a Berkshire police station in connection with the allegations of fraud at A4e.

A4e responded to the latest allegations by claiming it had made "significant enhancements to all its systems, including the appointment of external auditors".

A statement from the company said: "To get this into its proper context, while this investigation uncovered a number of areas where procedures may have been lacking, the final audit and further investigation determined that five claims were irregular and related to one former employee.

"This was reported to the DWP risk assurance division, which confirmed that the action taken by A4e fully met their own audit requirements and that they considered the matter satisfactorily resolved. A4e repaid the value of these three claims in full, which totalled less than £5,000.

"A4e raised concerns about the risks with these historic, paper-based systems with the DWP and relevant House of Commons select committees on a number of occasions. As a result the DWP introduced electronic systems for the current work programme. This is a payment-by-results system which places financial risk on the provider, and not the taxpayer.

"A4e has appointed international law firm, White & Case LLP, to lead an independent and thorough audit of A4e's controls and procedures."