The Importance of Segregation of Duties in Preventing Fraud 🚨

One of the most common control deficiencies businesses face is the lack of segregation of duties. Here’s a practical example:

Example:

An employee is responsible for both creating vendor invoices and approving payments. This overlap creates a dangerous opportunity for fraudulent activity, such as generating fake invoices and approving unauthorized payments. Without proper segregation, there is no independent verification, increasing the risk of undetected fraud.

Impact:

Without separating responsibilities, companies are left vulnerable to fraud and errors. When a single employee controls multiple aspects of a transaction, it bypasses the checks and balances that ensure accountability.

Remediation:

To minimize this risk, it’s essential to separate duties such as creating, approving, and processing invoices among different employees. This reduces the chance of fraud and ensures that no single individual has complete control over the process.

Does your company have proper segregation of duties in place? Let’s discuss how to strengthen your internal controls!

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