Assessing Organizational Fraud Risk Through the Segregation of Duties

Segregation of duties is one of the key concepts of internal controls, and BDO Consulting’s Fraud Prevention practice has developed the 2009 Segregation of Duties Checklist. This tool was designed to assist organizations in identifying fraud risks due to a lack of segregation of duties. It is being made available through Financial Executives Research Foundation (FERF).

The concept of segregation of duties is to separate the following responsibilities in each business process:

·         Custody of assets

·         Record keeping

·         Authorization

·         Reconciliation

Ideally, no individual employee should handle more than one of the above-noted functions in a process. When an organization separates these functions among its employees, it has implemented a strong internal control, which may deter and prevent employee fraud.

When duties cannot be segregated, compensating controls should be considered.

This Segregation of Duties Checklist provides Control Considerations, Recommendations and Examples of Compensation Controls for each business process within 10 different business cycles.

BDO’s 2009 Segregation of Duties Checklist can be downloaded at the FERF Bookstore. It is a free download for U.S. members of FEI. Download the Segregation of Duties Checklist.