Segregation of Duties

Segregation of duties is a key control in any organization. It ensures that no two critical transactions are done by same employeee, thereby limiting chances of frauds and later their concealments. Basically, the following six activities in any business function needs to be sgeregated.

1. Planning
2. Development
3. Execution
4. Approval
5. Monitoring
6. Reporting

If an individual is doing more than one of the above activities, there is a possibility of incorrect reporting to concealment of frauds & errors.

The auditor should, by way of a process walk-through, identify & report possibile conflict of interest arising out of improper segregation of duties. If conflict of duty is observed, the transactions should be further investigated to look for possible frauds or errors concealed.

The below tables details activities to be segregated in various departments. This is not an exclusive list and may be amemded based on criticality of process & type of business unit.

Purchase
1. Budgeting
2. Inviting quotations
3. Comparative analysis of quotations
4. Approving quotations
5. Entering into rate Contracts
6. Add, delete or amend Vendor Master
7. Raising Purchase Order (PO)
8. Amendment to / Deletion of PO
9. Approving PO
10. Preparing GRN
11. Booking of bills
12. Approval of bills
13. Payment of bills
14. Issue of debit notes/credit notes

Stores
1. Preparing GRN
2. Sales order receipt
3. Sales order entry
4. Sales/issues of material
5. Accounting of sales/issues
6. Stock taking
7. Adjustment to stock
8. Approval for adjustment
9. Reporting of stock status

Accounts
1. Maintenance of Account masters (Add/delete/change)
2. Booking of vouchers, JVs, Debit/Credit Notes
3. Approval of vouchers, JVs, Debit/Credit Notes
4. Preparation of cheques
5. Approval/Signing of cheques
6. Receipt/Payment accounting
7. Bank/Cash reconciliation
8. MIS on accounts