9/27/21, 3:52 PM Segregation of Accounts Payable Duties Basics

Segregation of Accounts Payable Duties Basics

The Concept

The segregation of duties concept is simple enough. Implementation is a different story. In order to perpetrate a fraud through accounts payable, it is frequently necessary to have
access to more than one function. For example, a person would have to have access to the check stock and the facsimile signer. Thus, one of the easiest ways to prevent fraud is to
assign responsibilities in such a manner to minimize this risk. Depending on the size of the department, it may be necessary to work with another group to achieve this goal. The
accompanying chart spells out some standard segregation of duties as they apply to accounts payable.

Alternatively, close scrutiny on a regular basis of any person with multiple conflicting responsibilities is recommended. Companies sometimes get lulled into a false sense of security
because the particular employee with multiple conflicting responsibilities has been with them a long time. This is a mistake, as most frauds are committed by long-time trusted
employees.

The Common Problem

All too often an organization diligently sets up its procedures to ensure appropriate segregation of duties and then shoots itself in the foot by giving one or two people access to all
tasks. The rationale for this varies. Sometimes a manager wants to make sure he or she can step in and train or fill in whenever needed. In other cases, high-level executives feel
they should have access to all information and functions.

The reasoning in both cases is faulty. No one should have access to everything—no matter how trusted an employee. Remember, most internal frauds are committed by long-term,
trusted, employees.

If there is conflict over this issue, invite the auditors to weigh in and explain why the segregation is necessary.

Call out:

No one should have access to everything—no matter how trusted an employee. Remember, most internal frauds are committed by long-term, trusted, employees.

Sample Segregation of Duties Chart:

The person responsible for bank reconciliation should not:

Handle unclaimed property reporting;

Be a signer on a bank account.

The person who is a check signer should not:

Authorize an invoice for payment on an account on which he/she is also a signer;

Have ready access to the check stock.

A person who is responsible for the check stock should not:

Be an authorized signer;
Handle the bank reconciliations.

The person who is responsible for the master vendor file should not:

Be an authorized signer;
Be able to approve invoices for payment;
Handle unclaimed property.

The person responsible for unclaimed property should not:

https://www.ap-now.com/public/Segregation-of-Accounts-Payable-Duties-Basics.cfm 1/2
9/27/21, 3:52 PM Segregation of Accounts Payable Duties Basics
Have responsibility for bank reconciliation;
Have access to the master vendor file.

https://www.ap-now.com/public/Segregation-of-Accounts-Payable-Duties-Basics.cfm 2/2