![]() 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. Such arrangements reduce the risk of undetected error and limit opportunities to misappropriate assets or conceal intentional misstatements in the financial statements. In general, the flow of transaction processing and related activities should be designed so that the work of one individual is either independent of, or serves to check on, the work of another. Ideally, separate employees will perform each of the four major duties. If internal control is to be effective, there needs to be an adequate division of responsibilities among those who perform accounting procedures or control activities and those who handle assets. ![]() Approving time cards and having custody of pay checks.Depositing cash and reconciling bank statements.Reconciling bank statements/accounts and booking entries to general ledger.Receiving funds (checks or cash) and approving write-off of receivables.Authorizing a transaction, receiving and maintaining custody of the asset that resulted from the transaction.Some examples of incompatible duties are: Generally, the primary incompatible duties that need to be segregated are: Segregation of duties is a key internal control intended to minimize the occurrence of errors or fraud by ensuring that no employee has the ability to both perpetrate and conceal errors or fraud in the normal course of their duties.
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