The evidence, tendered to the government-appointed Commission of Inquiry, shows AWB's senior management must have known there were serious worries about the actions of its global marketing division staff at least five years ago.
But AWB apparently did nothing nothing about it.
The audit report by consultants Arthur Andersen, delivered in late 2000, raised as a key concern AWB's system of paying trucking fees for Iraq to Jordanian company Alia, a front for the Iraqi government.
That was the method used by Saddam's regime to collect A$300 million in kickbacks from AWB under the United Nations' oil-for-food program, a clear breach of UN sanctions in force against Iraq.
Canadian complaint
It also listed issues including the Canadian government's complaint to the UN about the trucking fees, concerns raised by the UN itself, AWB's use of middlemen to pay Alia and fears that those payments might amount to money laundering.
AWB used several companies to pay the money to Alia, the report said, but one pulled out quickly when it came under suspicion by a foreign government.
"They withdrew from making any other payments after inquiries by the Singapore Monetary Authority for suspicion of money laundering," the document said.
Commissioner Terence Cole said the report had clearly put AWB on notice about its actions.
"What you have laid out by Arthur Andersen for your company five years ago are the very problems I'm investigating now," Mr Cole told AWB chief executive Andrew Lindberg on the witness stand.
Mr Lindberg could not recall seeing the audit report and said he only assumed his managers would act on it.
"I had faith in the people reporting to me to deal with these issues," he told the inquiry. "I had no reason to think they weren't being dealt with."
He said he assumed his managers were acting on the recommendations but could provide no evidence that they had.
The commission has already heard evidence that AWB used a company called Ronly Holdings, based in the UK, to make the payments to Alia.
The latest evidence stated that Ronly made the payments through a company in Liechtenstein.
The tiny European nation has a sophisticated offshore financial services sector and the US government, including the CIA, have repeatedly raised concerns about money laundering in the country.
Ronly received 20 US cents per tonne of contracted wheat for its services.
The Arthur Andersen report said AWB's system of paying the trucking fees "could be misinterpreted as a money laundering process".
Management pressure
Other issues raised in the audit included management pressure to maintain wheat sales to Iraq, money that was paid to Pakistan, the deletion of records, concerns about travel expenses and offers of gifts, entertainment and money to AWB employees.
Much of the report was suppressed by the commission, with only extracts being read out.
In other evidence, Mr Lindberg admitted his company deceived the UN by repeatedly inflating wheat prices in a murky operation to recover a debt from Saddam's government.
The deal artificially inflated wheat prices under the oil-for-food program and ripped off the UN to recover an almost US$8 million (A$10.7 million) debt AWB was collecting for resources giant BHP.
After repeated questioning, Mr Lindberg conceded that "if that is all of the information and knowledge and understanding, then perhaps" the UN was deceived.
"Is the answer yes?" commission senior counsel John Agius SC asked. Mr Lindberg replied: "Yes."
BHP said it was conducting its own investigation into the affair. "The company is working hard to clarify the facts as soon as possible," it said.
The deal involved BHP handing a joint venture partner, Tigris Petroleum, responsibility for an US$8 million debt Iraq owed BHP for a wheat shipment it funded on credit in 1996, before the oil-for-food program began.
Debt recovery
AWB was helping Tigris recover the debt and decided to get the money back by progressively increasing its wheat prices under the oil-for-food program.
Tigris was to pay AWB a US$500,000 fee for its services, but documents tendered to the commission today showed that fee could have been as high as US$1.3 million.
AWB drew up a "sham" agreement to pay Tigris A$7.8 million - the exact amount of the debt owed to BHP, as a "commission" for lobbying the Iraqi government to resume its stalled wheat trade with Australia.
Mr Lindberg conceded he probably did see a copy of the Tigris agreement, after earlier saying he had not, but insisted he had not mislead AWB's board.
Mr Agius on Wednesday tendered documents implying Tigris, on AWB's behalf, may have been looking to bribe Iraqi officials to resume the wheat trade after coalition forces invaded the country in early 2003.
Labor increases pressure
Meanwhile Opposition foreign affairs spokesman Kevin Rudd has called on Prime Minister John Howard and Foreign Affairs Minister Alexander Downer to reveal whether they held meetings with an AWB delegation in 2002.
A Commission Of Inquiry is currently investigating the company's role in hundreds of millions of dollars paid out in kickbacks to Saddam's regime during the corruption ridden UN oil-for-food program in Iraq.
Mr Rudd said an Australian Associated Press (AAP) report showed an AWB delegation in Canberra held separate meetings with Mr Howard and Mr Downer after it returned from Baghdad in mid 2002 and after Iraq had started to threaten Australian wheat contracts.
"Interestingly, there's an AAP report at the time which says when the delegation of the AWB came back to Canberra from Baghdad they met separately with the Foreign Minister Mr Downer and the Prime Minister John Howard," Mr Rudd told ABC televison’s 7.30 Report.
"I'll be interested to know from both those gentlemen as to whether those meetings occurred and what was in it."
"But we do know from the outcome is this: John Howard's warlike language to Iraq not only continued, but it got worse. And guess what: our wheat sales to Iraq continued and in fact the prices seemed to have got even better."
Government denial
Mr Howard and Mr Downer have repeatedly denied they have anything to hide over the scandal.
In a letter published in The Australian newspaper, Mr Downer said the government had cooperated fully with the UN's Volcker inquiry into the oil-for-food scandal and had established the Cole inquiry.
He said many government ministers, past and present, from both sides of politics, had met with the AWB.
Mr Rudd said Australia must repay A$10 million which the AWB had ripped off the United Nations' Iraq oil-for-food program, and the wheat marketer's boss now had no option but to resign.
He called on the Howard government to detail how it proposed to restore Australia's international reputation in the wake of the scandal, after he was asked if taxpayers might have to foot the bill if the AWB can't be forced to pay up.