Segregation of Duties and Fraud Prevention
Reducing Opportunities for Fraud
Segregation of duties divides critical responsibilities among different individuals so that no single person controls an entire transaction. This significantly reduces opportunities for fraud and unintentional errors.
- Separate authorization from recordkeeping.
- Separate custody of assets from accounting.
- Separate transaction processing from review.
- Require independent reconciliations.
Note
Smaller organizations may use increased management oversight when full segregation of duties is not practical.
Summary
Proper segregation of duties is one of the most effective internal controls for preventing fraud.