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19 Examples of Segregation Of Duties

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Segregation of duties is the principle that no single individual is given authority to execute two conflicting duties. This is a basic type of internal control that is used to manage risk. In many cases, segregation of duties is required by law or standards in areas such as accounting, corporate governance and information security. The following are illustrative examples of segregation of duties.

Vendor Maintenance & Posting Invoices

Separation of creating vendors in a system from posting and paying invoices. Helps to prevent fictitious customers with fictitious invoices.

Purchase Orders & Approvals

Purchase orders typically require multiple approvals.

Payments & Bank Reconciliation

Making payments to vendors and reconciliation of bank statements.

Paychecks & Bank Reconciliation

Paying employees and bank reconciliation.

Journal Entry & Approvals

Separation of entering a journal entry and approval of journal entries.

Custody of Cash & Account Receivable Reconciliation

Separating roles that manage cash deposits from customers and reconciliation of those deposits with sales records.

Hire & Set Compensation

Hiring an employee and setting their compensation. Helps to prevent people from hiring friends at an inappropriate salary.

Hire & Approve Hire

Hiring an employee often has to be approved by multiple departments.

Expenses & Expense Approvals

Separation of claiming and approving expenses.

Asset Custody & Asset Inventory

Separation of custody of assets and record keeping related to those assets.

Sales & Approvals

Separation of selling and approval of sales deals such as approval of margins and customer credit.

Customer Maintenance & Credit Notes

Adding customers in a system and posting credit notes.

Shipping & Customer Accounts

Shipping and receiving is separated from posting transactions such as credit notes to a customer's account.

Risk Management & Trading

Separating risk taking activities such as financial trading from risk management activities.

Advising Clients & Trading

Separation of advising banking clients on things such as mergers & acquisition from trading that firm's stock.

Development & Administration

Separating development of software and administration of systems, particularly production systems. Allows process to be followed in updating code that is tested and reviewed.

Development & Operations

Separation of software development and the operation of related systems and services. Allows problems with software to be reported accurately and managed within process.

System Access Permissions

Adding and editing system access permissions is viewed as a root authority that is separated from all financial management activities.

System Configuration & Approvals

Changing systems and software typically requires a number of approvals. For example, implementing changes to firewall rules is separated from approving those changes as a basic security control.
Overview: Segregation Of Duties
Segregation Of Duties
The principle that no single individual is given authority to execute two conflicting duties.
Also Known As
Separation of Duties
Related Concepts
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More about internal controls:
Change Control
Credit Risk
Fat Fingers
Internal Controls
IT Controls
Risk Control
Risk Management
Work Process
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