Segregation of duties might sound like more effort than it is worth, particularly within small organizations with limited resources. However, it can make all the difference in protecting your company to segregate the below responsibilities within your business processes:
- Authorization
- Custody of assets
- Reconciliation
- Recording transactions
Segregating these core responsibilities protects against external forces such as emotion, coercion, blackmail, and human error influencing an individual to commit and conceal errors or fraud. Responsibilities should be divided so that there are natural checks in place on any individual’s performance of their duties. Below is an example that shows which accounts payable duties cannot be performed by the same person.
| Task | Staff Accountant | Controller | Dept. Manager |
| Approve bills (authorization) | X | ||
| Submit payment (custody) | X | ||
| Enter bills to GL (recording) | X | ||
| Bank reconciliation (reconciliation) | X |
Within smaller organizations, this may sound great, but not feel possible. That is where a third-party can assist. Outsourcing the accounting function inherently implements segregation of duties. The right outsourced team will have dedicated individuals and technologies to perform the various duties of a traditional accounting department, with certain management duties retained in-house. Below is another example, this time illustrating segregation of duties with an outsourced model.
| Task | Outsourced
Team |
Dept. Manager |
| Approve bills (authorization) | X | |
| Submit payment (custody) | X | |
| Enter bills to GL (recording) | X | |
| Bank reconciliation (reconciliation) | X |
Outsourcing can be a great way to implement segregation of duties while maintaining efficiency. The Outsourced Accounting Solutions Team at Wolf & Company utilizes the most efficient procedures and technologies to take on your accounting and finance function and improve your internal controls. For details on Wolf’s robust suite of OAS services, reach out to Rebekah Purrazzella at [email protected] to discuss your finance and accounting needs.
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