Separation Of Duties
Separation Of Duties

Separation of Duties Definition

Some circles refer to separation of duties as segregation of duties. It refers to a concept that leads to greater internal control within a company. The accounting separation of duties definition is a theory that the job of an employee should provide a reasonable evaluation for the job of another employee. In layman’s terms, no one person has too many responsibilities rested on him/her. What this does is prevent mistakes and fraud which could bring detrimental consequences upon the company as a whole as well as the individual.

Separation of Duties Example

A separation of duties example could be the relationship that exists between an accountant and a cashier. This policy maintains that the accountant should not update the cash balance on the cash as well as keep track of the cash on his person. Contrarily, the cashier should not have both those responsibilities either. It upholds that the accountant should keep track of the cash books while the cashier accepts responsibility for the cash that’s on hand. At the same time, separation of duties works for constructs other than business types. Our government has Legislative, Judicial, and Executive branches. The “duty” of running an efficient and successful government is spread over three entities.

Accounting Separation of Duties

While it is intelligent for there to be some sort of accounting separation of duties when it comes to jobs in general, it is paramount to efficiency and success. In fact, keep accounting completely separate from the rest of the operations divisions in the company. This remains constant for all aspects of production and financing. Therefore, there should be no individuals in the work-in-progress section that are keeping track of products in the finished goods section.

Why Is Separation Of Duties Important?

Obviously, as said before, duties maintains an efficient balance of work that ensure the accuracy and correctness of jobs. The work of one man, in turn, checks the work of another. Overall, this keeps a company or organization running as smoothly as possible. In addition, it produces accurate product and financial information. Separation of duties also creates jobs for more individuals. If one person was expected to be responsible for multiple jobs, then there would most certainly be fewer jobs for others. This spreading of responsibility allows for a more manageable workload. In addition, it allows for more available responsibilities for others to take.
separation of duties, Accounting Separation of Duties

ARTICLES YOU MIGHT LIKE

The Accounting Gap Between Large and Small Companies

The Accounting Gap: It’s unfortunate, but true. A large gap exists between the accounting departments of large or publicly traded companies and smaller or private companies. In our past 25 years of consulting we’ve noticed that more often than not, these smaller/private companies will fill the gap with Bookkeepers, rather than the degreed Accountants/CPAs they

Read More »

The Struggles of Private Company Accounting

Building your Accounting Department… When I meet a business owner operating at a successful $10+ mil in revenue I often hear them say “My CPA…” and I immediately know they are referring to a tax CPA. One thing ALL entrepreneurs have in common is that they have to file a tax return. So from day

Read More »

Financial Ratios

See also:Quick Ratio AnalysisPrice to Book Value AnalysisPrice Earnings Growth Ratio AnalysisTime Interest Earned Ratio Analysis Use of Financial Ratios Financial Ratios are used to measure financial performance against standards. Analysts compare financial ratios to industry averages (benchmarking), industry standards or rules of thumbs and against internal trends (trends analysis). The most useful comparison when

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

THE ART OF THE CFO®

Financial Leadership Workshop

Days
Hours
Min

June 12-15th, 2023

SHARE THIS ARTICLE
WIKI CFO® - Browse hundreds of articles