When children stand quiet they have done some harm.

The saying treats children's unusual quietness as a reason to suspect that they have done something wrong and are keeping it to themselves.

It turns that suspicion into a firm conclusion. The point is the observer's inference from silence, not that quietness proves the children have caused harm.

Someone might say this when children are conspicuously quiet and they suspect mischief. It can prompt a closer look at what the children are doing, but should not be treated as an accusation based on silence alone.