22 Nov Segregation of Duties
Segregation of Duties
One employee should not have control of the asset and access to the record keeping. If this rule is followed the employees would need to be in collusion to effectively circumvent the internal controls in place.
This process also includes dividing related transactions to provide for checks and balances. For example, if goods or services are received they should be confirmed from one employee but the payment should be generated from a different employee.
This is one of the most difficult questions to be addressed in a small business. There may be only one employee who is responsible for all the support functions from answering the telephone to preparing invoices to opening the mail to processing the bank deposit. This lack of internal control is a recipe for fraud. Although it is not easy, it is important to discover a way to make the paperwork flow without this total control by one individual.