Homework SoursePractice Gradebook ORION signment CES Question 8 Essay Donal
Solution
Segregation of Duties
Segregation of duties is indispensable in a system of internal control.
The rationale for segregation of duties is that the work of one employee should, without a duplication of effort, provide a reliable basis for evaluating the work of another employee.
There are two common applications of this principle:
The responsibility for related activities should be assigned to different individuals.
The responsibility for record keeping for an asset should be separate from the physical custody of the asset.
Related Activities:
When one individual is responsible for all of the related activities, the potential for errors and irregularities is increased.
Related purchasing activities should be assigned to different individuals. Related purchasing activities include ordering merchandise, receiving goods, and paying (or authorizing payment) for merchandise.
Related sales activities also should be assigned to different individuals. Related sales activities include making a sale, shipping (or delivering) the goods to the customer, and billing the customer.
Record Keeping Separate from Physical Custody
The custodian of the asset is not likely to convert the assets to personal use if one employee maintains the record of the assets that should be on hand and a different employee has physical custody of the assets.
