To Separate Duties or Not to Separate Duties, That Is the Question

By Chrissie A. Powers, CPA/CFF, CFE, CVA

Separation of duties is the concept of having more than one employee required to complete a job assignment. In the accounting world, this is an internal control to deter fraud, waste and abuse. By implementing separation of duties within a business, checks and balances are put in place. Proper separation of duties is key in a business to deter fraud.

Generally, the four critical accounting duties can be categorized into: authorization, custody, record keeping, and reconciliation. Ideally, one employee should not perform more than one of these categories. Each duty should be performed by a separate employee. In small businesses, this is often difficult to achieve, but should be implemented as much as possible.

Your wheels are turning as you remember reading a section on separation of duties in your client’s accounting policies and procedures manual. The next step is to see if the documented separation of duties policy is being followed by the employees. Often, we are called on suspected fraud allegation for an organization to find out, the separation of duties is documented in the organization’s procedures but the workflow and chain of execution are not being followed. Thus, fraud has occurred because separation of duties was not practiced.

Most fraud schemes require the fraudster to be at work every day to keep the scheme alive. One way to deter fraud schemes is to require job assignment rotation and require a mandatory one-week vacation. This allows another employee to perform that individual’s assignment. It is important that another employee perform the assignment while they’re on vacation and not let the work pile up until they return from vacation.

If your client’s organization suspects fraud, P.D. Eye can investigate the allegations. If you have additional questions or concerns regarding fraud, don’t hesitate to contact us at 614.722.7914.

Chrissie A. Powers, CPA/CFF, CFE, CVA

Chrissie A. Powers,
CPA/CFF, CFE, CVA

Managing Member
P.D. Eye Forensics, LLC