Question

Accounting Information System

What is meant by the term “segregation of duties control” (sometimes referred to as the “separation of duties control”). Discuss fully. In your explanation discuss the “how”, “when”, “where” and “why” of the segregation of duties control, and some of the limitations or disadvantages of this type of control. You can provide examples to illustrate your explanation.

Answer 1

Segregation of duties refers to having different persons perform different duties to process a given transaction. For example, segregation of duties in purchase transaction involves the user to raise purchase indent, purchase team to invite quotes from vendors, shortlist vendors and raise PO on the vendors, stores team to receive the goods, quality control team to check the quality of the inward materials, accounts payable team to process purchase invoices.

The persons performing duties are normally from different departments thus no department has complete control over a transaction leading to misuse of powers. Different departments with different heads ensure that each department is accountable for their part of the transaction.

However, too much segregation of duties delays processing of transactions, involves additional manpower costs. Segregation of duties may fail where there is collusion between two or more persons. For example, if user and the stores team collide then there can be additional quantity of items purchased that can be pilfered.