What is the purpose of segregation of duties in accounting controls?

• A. Dividing tasks among employees to reduce risk of error and fraud
• B. Centralizing authority to speed processing
• C. Increasing the chance of errors
• D. Decreasing internal controls

Answer: (B)

Segregation of duties distributes responsibilities for a transaction among different people—authorization, recording, and custody—so that no single person controls all parts of the process. This creates checks and balances that make it much harder for mistakes to go undetected and for someone to fraudulently alter records without being noticed. For example, the person approving a payment should be separate from the person recording the transaction and from the person who handles the cash, with a third party reconciling accounts. The goal is stronger internal controls and reliable financial information, not faster processing or centralized control. Centralizing authority weakens these controls, and choices suggesting increasing errors or decreasing controls miss the purpose of reducing risk and improving detection.