Segregation of Duties
Lesson:
Firms often have workers wearing multiple hats.
This can be dangerous, because when one person does many things, he may be able to hide undesirable behavior, like theft.
For this reason, well-run firms try to segregate certain tasks so that no individual can perform more than one task.
The most commonly suggested to segregate are:
- Custody of Assets
- Authorization of Transactions
- Recording of Transactions
- Reconciliation of existing assets to recorded amounts
A client is trying to provide more work to an employee, but he wants to ensure that a segregation of duties is maintained.
Here are the relevant facts:
- Adam Thomas approves a contract with a new supplier.
Which category of task is Adam currently fulfilling?
Answer:
- Authorization of transactions