Segregation of duties refers to the separation of the various duties and responsibilities such that one person cannot process and record complete transactions from beginning to the end without being checked by another person. E.g. in the purchase of a company‘s fixed assets a single individual should not authorise the purchase, place the order, receive the asset and record the transaction in the accounting records, to minimise the risk of error and/or intentional manipulation of information.
Segregation of duties is important because:
Helps detect errors in processing transactions. This is because the work of one individual will be checked by another. Errors made will be detected;
Helps in deterring fraud. Segregation of duties would help in deterring people from perpetrating frauds. This is because the work of every individual is counter checked by another person.