Separation of Duties SpringerLink

This is a (bottom-up) role-mining activity, which was performed by leveraging the identity management product chosen for the implementation of the identity management system. A problem with the separation of duties is that it is much less efficient and more time-consuming than having a single person be responsible for all aspects accounts receivable & accounts payable of a transaction. Thus, you should examine the tradeoff between increasing the level of control and reducing the amount of efficiency when deciding whether to implement the separation of duties in some areas. It is quite possible that the improvement in control is not sufficient to offset the reduced level of efficiency.

  • Such rules can detect a conflicting assignment in the creation or modification phase and report such violations.
  • Roles, responsibilities and levels of authority are established, agreed upon and communicated through a second management practice (APO01.02).
  • Additionally, Penn receives significant funding from federal sponsors and other sources that carry substantial fiduciary responsibilities.
  • While it is intelligent for there to be some sort of accounting separation of duties when it comes to jobs in general, it is paramount to efficiency and success.
  • Segregation of Duties poses a distinct challenge, requiring strong collaboration between business and IT stakeholders to evaluate, mitigate, reduce, and monitor cyber, fraud, and material misstatement risks.

Regardless of size or industry, most businesses have some core business application or ERP system that needs Segregation of Duties (SoD). SoD ensures proper oversight and reduces the risk of fraud or data breaches within your core system. To illustrate the three-way match, let’s assume that BuyerCo needs 10 cartridges of toner for its printers.

What is Segregation of Duties?

By separating employee’s duties, the likelihood of theft, embezzlement, etc. is reduced. The reason is it will now require two dishonest people working together to admit to each other that they are dishonest and then plan and carry out the crime. In order to ensure the propriety of submitted hours, employee time cards/records are to be approved by their supervisor as certification that the hours/work were actually performed as reported. Supervisors should sign or initial and date the timecards to document their review and approval. Do no return approved timecards to employees for delivery to the timekeeper for input. This provides individuals with the opportunity to alter an already approved timecard and receive inappropriate additional pay.

Below are the critical considerations and challenges posed by the interplay of ERP roles and SoD management. Access Governance solutions have become essential for organizations to effectively manage SoD and to control role changes and user responsibilities. Access governance solutions are crucial in continuously recalibrating your Segregation of Duties protocols to safeguard against internal risks.

The accounting separation of duties definition is a theory that the job of an employee should provide a reasonable evaluation for the job of another employee. In layman’s terms, no one person has too many responsibilities rested on him/her. What this does is prevent mistakes and fraud which could bring detrimental consequences upon the company as a whole as well as the individual. Segregation of duties (SoD) in accounting is defined as developing a system where no person is performing tasks within more than one of three general functions. It’s an internal control mechanism that prevents fraud and error, and proper SoD ensures checks and balances within the business.

Guide for Separation of Duties

If they think fraudulently, they can be creative and charge the fuel expenses of their personal vehicle as fuel expenses of the company trucks. This can exist if there is no proper SoD in payroll, such as letting the business bookkeeper or payroll accountant maintain, collect, and compute timesheets, prepare payslips, disburse payroll, and record payroll entries. The primary reason churches do not separate these duties is because of a lack of manpower.

Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. In order for a team to work efficiently, each person must be working in a manner that highlights their strengths. This prevents one employee from struggling to complete responsibilities he or she is not prepared for. You don’t want your CFO doing bookkeeper tasks, nor should your bookkeeper try to be your CFO.

Cash Controls

Don’t let separation of duties and internal controls break down because resources are limited. All expenditures are expected to be made for ordinary, reasonable, and actual business-related activities in furtherance of University and Health System missions. Additionally, Penn receives significant funding from federal sponsors and other sources that carry substantial fiduciary responsibilities. Failure to require supporting documentation evidencing business purpose to internal reviewers can result in inappropriate expenditures going undetected. Failure to provide supporting documentation with business purposes to external reviewers could result in disallowances, fines, penalties which have financial and reputational impacts for the University. When duties cannot be sufficiently segregated due to the small size of a unit, it is important that mitigating controls, such as a detailed supervisory review of the activities, be put in place to reduce risks.

If an authorizing person has access to the physical assets and records, it increases the risk of fraud and misappropriation of assets. Hence, employees who can authorize transactions mustn’t be involved in bookkeeping or safekeeping of physical assets. They provide centralized control over critical business functions by enforcing user roles that execute SoD policies. But it is important to understand the intricacies of ERP roles to understand the requirements of an SoD solution fully.


Realize that SoD, although an excellent preventive control, is not an absolute control and it will not stop all attempted fraud as it can be bypassed with collusion. Enterprise applications, like SAP, Oracle, and Microsoft Dynamics, help your organization manage and streamline processes and automate operations. This reality has turned Segregation of Duties into a matter of access control because almost all accounting and finance operations are carried out in digital systems. And ineffective Segregation of Duty access control within your ERP can result in operational losses, financial misstatements, breaches, and fraud. For example, for all employees in a given office, role mining contained a list of the permissions they had been granted on the applications that support the enterprise architecture of the company.

Therefore, the first scoping rule is that duties must be segregated for every single asset to avoid conflicts (as in the first example in which two employees exchange their duties). In information systems, segregation of duties helps reduce the potential damage from the actions of one person. IS or end-user department should be organized in a way to achieve adequate separation of duties. According to ISACA’s Segregation of Duties Control matrix,[3] some duties should not be combined into one position.

Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

Process descriptions may be described at a closer level of detail in the enterprises. One person orders goods from suppliers, and another person logs in the received goods in the accounting system. This keeps the purchasing person from diverting incoming goods for his own use. Examples of the separation of duties are noted below for a variety of functional areas. This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique.

If you have a secretary who primarily answers phones, she could also reconcile the bank statement once a month. Users may inherit risk through roles in ERP systems like Oracle Cloud and Workday. A key capability is a SoD solution that works with your current technology and can evolve as your technology changes. This adaptability is crucial in preventing security risks in your changing environment. Vendors often send statements to their customers to indicate the amounts (listed by invoice number) that remain unpaid. When a vendor statement is received the details on the statement should be compared to the company’s records.

Performance evaluations are valuable tools that provide staff members with feedback on their performance and accomplishments for the previous year. They also assist staff members in understanding their job responsibilities and supervisor’s performance expectations. Evaluations are expected to be fair, representative of actual performance, written, and performed on an annual basis. Failure to provide documented evaluations could complicate later disciplinary processes. Make sure each person’s job description aligns with what they are doing. Having written job descriptions puts everything on paper and leaves less room for miscommunication of roles and responsibilities.

Terms Similar to Segregation of Duties

Still, SoD governance may benefit from introducing further controls to reduce risk to acceptable levels. For example, third-party audits by a separate function (e.g., internal audit) or an external entity (e.g., external audit) may be beneficial. In this case, a function-level or company-level SoD may be used, for example, to assess effectiveness of individual-level SoD. This is a secondary level of controls that provides assurance about the effectiveness of existing SoD controls. This alternate model encompasses some management duties within the authorization of access grant and segregates them from the other duties.

Testing is an integral part of ensuring the effectiveness of your SoD solution. Testing for Segregation of Duties policy violations, user-role assignments, and security objects is important. Default or “seeded roles” in your ERP system can pose risks due to their configurations, which may not be specifically designed to prevent SoD violations. In some cases, these roles may contain inherent violations, requiring customization to align with your organization’s compliance needs.