Segregation of duties is important because it helps prevent what?

Segregation of duties is a critical internal control principle in organizations designed to prevent errors and fraud. This principle involves dividing responsibilities among different individuals to reduce the risk of having one person in total control over any aspect of a financial transaction. By ensuring that no single individual is responsible for all parts of a financial process, organizations create a system of checks and balances.

This structure means that the actions of one employee can be verified and reviewed by another, which acts as a deterrent to fraudulent behavior and significantly reduces the likelihood of mistakes. For example, if one person is responsible for authorizing transactions, another for processing them, and a third for reconciling accounts, it becomes much harder for any single individual to commit fraud without detection.

In contrast, growth in company revenue, unclear job responsibilities, and minimization of company costs are not directly addressed by segregation of duties. While they are important aspects of overall business performance and management, they do not specifically relate to the primary goal of preventing errors and fraud, which is the core focus of implementing effective segregation of duties.