Khaliq: Segregating functions for risk mitigation
Tuesday, 25 July, 2023 - 02:03
The segregation of duties is a fundamental principle of internal controls that helps to mitigate the risk of fraud, errors, and unauthorized activities. Here's how segregation of duties can strengthen internal controls in various functions of finance, says Abdul Khaliq.
6 Functions x Segregation of Duties = Risk Mitigation
➡ 𝗔𝗰𝗰𝗼𝘂𝗻𝘁𝘀 𝗣𝗮𝘆𝗮𝗯𝗹𝗲:
𝗦𝗲𝗴𝗿𝗲𝗴𝗮𝘁𝗶𝗼𝗻: Separate the roles of invoice processing, payment authorisation and cash disbursement.
𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗲𝗱: This ensures that no single individual has the ability to initiate, approve and record payments, reducing the risk of fraudulent payments or inappropriate relationships with suppliers.
➡ 𝗔𝗰𝗰𝗼𝘂𝗻𝘁𝘀 𝗥𝗲𝗰𝗲𝗶𝘃𝗮𝗯𝗹𝗲:
𝗦𝗲𝗴𝗿𝗲𝗴𝗮𝘁𝗶𝗼𝗻: Separate the roles of generating customer invoices, posting receipts and performing collections.
𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗲𝗱: Segregating these duties prevents individuals from manipulating balances on customers' accounts or misappropriating cash receipts, enhancing accuracy and preventing fraud.
➡ 𝗚𝗲𝗻𝗲𝗿𝗮𝗹 𝗟𝗲𝗱𝗴𝗲𝗿:
𝗦𝗲𝗴𝗿𝗲𝗴𝗮𝘁𝗶𝗼𝗻: Divide responsibilities between those who record transactions, reconcile accounts and prepare financial statements.
𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗲𝗱: Segregating these duties helps ensure that financial records are accurately maintained, reconciled and reviewed by different individuals, reducing the risk of manipulation or misstatement.
➡ 𝗙𝗶𝘅𝗲𝗱 𝗔𝘀𝘀𝗲𝘁𝘀:
𝗦𝗲𝗴𝗿𝗲𝗴𝗮𝘁𝗶𝗼𝗻: Assign different individuals to manage fixed asset acquisitions, record keeping and physical asset verifications.
𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗲𝗱: By segregating these duties, it reduces the risk of unauthorized disposals, misappropriation or misstatement of fixed assets, ensuring proper control and accurate reporting.
➡ 𝗣𝗿𝗼𝗷𝗲𝗰𝘁 𝗔𝗰𝗰𝗼𝘂𝗻𝘁𝗶𝗻𝗴:
𝗦𝗲𝗴𝗿𝗲𝗴𝗮𝘁𝗶𝗼𝗻: Separate the roles of project cost estimation, budgeting, tracking and financial reporting.
𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗲𝗱: Segregating these duties helps prevent individuals from manipulating project costs, budgets or financial results, ensuring accurate project accounting and preventing fraud.
𝗦𝗲𝗴𝗿𝗲𝗴𝗮𝘁𝗶𝗼𝗻: Divide responsibilities between cash management, bank reconciliation, investment decisions, and debt management.
𝗥𝗶𝘀𝗸 𝗠𝗶𝘁𝗶𝗴𝗮𝘁𝗲𝗱: Segregating these duties helps maintain checks and balances, ensuring accurate cash management, proper reconciliation, and appropriate control over treasury functions.
Abdul Khalid's experience includes developing and implementing financial policies and procedures. He understands the significance of well-defined policies and procedures in ensuring compliance with regulatory requirements and industry best practices. With meticulous attention to detail, he has successfully developed comprehensive policies and procedures that align with organisational objectives and enhance financial governance.
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