posted March 9, 2016

Segregation of Duties - But That Person is Out Sick!

by Aaron Vix, CPA, Staff Associate II

Have you ever been told “your organization needs to have segregation of duties”? This phrase might be completely new to some of you, while others understand it has to be implemented, but do not understand the underlying reasons.

The American Institute of Certified Public Accountants (AICPA) defines segregation of duties as “assigning different people the responsibilities of authorizing transactions, recording transactions, and maintaining custody of assets. Segregation of duties is intended to reduce the opportunities to allow any person to be in a position to both perpetrate and conceal errors or fraud in the normal course of the person’s duties.”

In a nutshell, segregation of duties provides checks and balances to ensure errors or fraud are having a second set of eyes look at them. Typically, business processes (e.g., accepting deposits, recording transactions in Quickbooks, reconciling bank accounts, maintaining the blank checks, being a check signer, etc.) have a specific person assigned to each task. But what happens when the assigned check signer, or person who makes deposits is out sick or on vacation? Does the business process stop because of this? It shouldn’t have to.

The concern is not to ensure that only the assigned person completes that task. Rather, your organization should focus on ensuring that the same person does not perform incompatible tasks. In other words, your organization should assign back up employees to these roles by taking these criteria into account:

  • Does this employee perform any other roles that are incompatible with this role?
  • Does this employee possess the required skillset to reasonably carry out this task?

If you can reasonably answer yes to these questions, this could be a good candidate for that role. And don’t be afraid to think outside the box when assigning roles!


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