Segregation of Duties

Segregation of duties is required to maintain control over cash handling procedures, and it is key to an effective internal control process.  It is designed to protect one person from the sole responsibility for all cash handling procedures, and it serves as a deterrent to fraud or concealment of error.  Proper internal control requires that different individuals be responsible for handling each aspect of the cash receipt procedure.  The individual who receives the cash cannot prepare the deposit, and the person who prepares the deposit does not do the account reconciliation.  Persons with the responsibility for maintaining receivable accounts should not also be collecting payments.  An employee with no cash handling responsibilities (who does not collect or deposit funds) should ensure that all funds received have been properly deposited and recorded.  Generally, the individual that provides this check and balance is an accounting supervisor.  Different employees should not work simultaneously out of the same cash drawer, and whenever funds are transferred among employees, responsibility should also be transferred through a receipting mechanism.

 

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Last modified on 08/21/08