What is segregation of duties?
Segregation of duties is a basic, key internal control and one of the most difficult to achieve. It is used to ensure that errors or irregularities are prevented or detected on a timely basis by employees in the normal course of business. Segregation of duties provides two benefits: 1) a deliberate fraud is more difficult because it requires collusion of two or more persons, and 2) it is much more likely that innocent errors will be found. At the most basic level, it means that no single individual should have control over two or more phases of a transaction or operation. Management should assign responsibilities to ensure a crosscheck of duties. • Authorizing a transaction, receiving and maintaining custody of the asset that resulted from the transaction. • Receiving checks (payment on account) and approving write-offs. • Depositing cash and reconciling bank statements. • Approving time cards and having custody of pay checks. • Having unlimited access to assets, accounting records and
