Separation of duties (SoD) is the internal control principle that distributes critical tasks and associated privileges for a business process among multiple people, ensuring that no individual has complete control over all aspects of any sensitive transaction or process[4][2].
The main objective of separation of duties is to prevent errors and fraud by requiring involvement from more than one person at key stages. When properly implemented, this makes it significantly more difficult for an individual to exploit or misuse organizational resources and also helps detect mistakes earlier[1][3][2].
Typical functions that should be separated include:
- Authorization: Reviewing and approving transactions or activities.
- Custody: Controlling or physically handling assets, such as cash or inventory.
- Recordkeeping: Creating and maintaining records of transactions.
- Reconciliation: Comparing records to verify accuracy and completeness.
Ideally, no single employee should carry out more than one of these major functions for any particular transaction[2][4].
Various enforcement methods are used:
- Static enforcement: Roles with conflicting duties are never assigned to the same person (e.g., one person authorizes payments; another processes them).
- Dynamic enforcement: Access controls are enforced in real time, such as requiring approval by another authorized user before a transaction is finalized[2][5].
Common examples of separation of duties in practice include:
- One person orders goods, but a different person logs the received goods into inventory[1][6].
- The person opening the mail containing checks should not be the one recording the checks in the accounting system[1][6].
- Setting up a new vendor should be distinct from the ability to process payments to that vendor[6].
- The employee who prepares payroll should not also authorize or distribute payroll payments[1][6].
Implementing SoD creates a system of checks and balances that supports risk management, reduces the opportunities for internal fraud or theft, and provides safeguards against inadvertent mistakes. However, achieving effective separation of duties also requires ongoing review and appropriate resourcing, as excessive separation can lead to inefficiency, while insufficient separation increases organizational risk[2][4].
Leave a Reply