Explain segregation of duties with an example.

• A. Split responsibilities for authorization, recording, and custody to prevent fraud.
• B. Combine duties to streamline operations.
• C. Assign all tasks to a single person to minimize handoffs.
• D. Eliminate all checks to speed processing.

Answer: (C)

Segregation of duties means dividing key steps in a process among different people so no one person controls all aspects of a transaction. This creates checks and balances that make fraud and errors much harder to conceal. For example, in handling vendor payments, one person should authorize the invoice, another should actually process the payment, and a third should record the liability in the accounting records; a separate person should reconcile the bank statement to ensure the payment matches what was recorded. By separating authorization, custody (the payment), and recording, the organization reduces the risk that a single individual could both commit and conceal fraud.