Why is Segregation of Duties Important in My Accounting Department?


Part 1 of 3
By Bob Swetz
Controller Consultant | Tier One Services, LLC
“Every business needs to be protected in order to survive and thrive.”

What is segregation of duties?
Segregation of duties is the concept of splitting key duties within the same accounting function among multiple personnel. For example, printing, checks and signing checks are in the same accounting function. Ideally, these duties should be performed by separate staff members.

Why is it important?
Allowing the same staff member to perform all or most of the duties in the same function creates an opportunity for that person to cover up improprieties. Let’s take the case referred to above and say that one staff accountant enters vendor bills, writes the checks for those bills, mails them and then to top it off does the bank reconciliation. That staff member could easily write checks to themselves, cash the checks and mark them as cleared in the bank reconciliation without anyone ever knowing about it.
It’s important to remember that controls such as adequate segregation of duties are not intended to point fingers or suggest someone is doing something wrong, they are just good business practice to safeguard the organization’s assets.

I have a small accounting department, so what can I do?
Creating and maintaining adequate segregation of duties is probably the most difficult control challenge a small organization faces. Check out how to face this challenge with a one-person accounting department in Part 2 of my series, How to Segregate Duties with Only One Accountant.

1 Comment
  1. Good piece Bob. I like the simplicity to make the point of an important issue for small organizations.