Seggregation of Duties

[Acid]

Hi ,

I have read many times in Studytext saying that seggregation duties is must and good for effective control.. for example the same person who is raising sales invoice shouldnt receive payments too .. What difference would it make if the duties are seggregated?


Thanks

Acid

[Acid]

Hi

I understand the ACCA Ethical guidelines about confidentiality , Can you provide with me examples in which case auditors should disclose the confidential info of the client? .

I am sure this is helpful in solving QB and past papers..

Thanks

Acid

[Vandana]

Hi Acid,

You raise 2 good questions here - and here are my answers:

1) Segregation of duties is VITAL in a business. Imagine if Anna Smith is working in the accounts department and is responsible for sending out the invoices for goods sold. She is also responsible for chasing up bad debts and receiving the payments. In this case, she could receive the money, but keep it for herself and state that it was a bad debt - the money was never received. In addition, she could also raise invoices to her friends (eg send goods out to them) and then state that the debts went bad. Admittedly, most organisations have different methods of dealing with the above, but overall, it is better control to have different people in charge of different parts of the processes, as there is less scope for errors/fraud happening.

2) Confidentiality - an auditor can usually break confidentiality in 2 circumstances: 1) if ordered by a court of law (i.e. if called to a legal case) or 2) if the auditor asks permission from the client to break confidentiality and the client agrees. This could happen if eg, somebody contacts the auditor to get some information about the client. The auditor would have to ask the client first before revealing any information.

Hope this helps!

[Acid]

Circumstances in which auditor may provide clients confidential information:


To Tax authorities if its a legal obligation to provide them with tax related information e.g. clients income and expenses.
To Police , If investigation is going on . Auditor must be cautious , it may be requirement of police that client shouldn't be informed of the ongoing investigation.
The auditor should disclose the info when he feels that no doing so may have an adverse impact on financial statements e.g. discovery of fraud should be reported to appropriate authorities like SOCC (Seriously organised crime committee) .
When the information is about public interest or national interest e.g. If client is involved in terrorism or criminal activities which may damage the public or national image then the information should be disclosed to appropriate authorities
The Auditor should also disclose where the professional bodies like ACCA code state they should. For example voluntary disclosure where the auditor think it would protect the client , say , in a court case !These are the points I am able to come up ... They can be useful in any question relating to confidentiality.

Cheers

Acid

[tracy]

Hi,

I understand the importance of seggregation of duties, but in practice for small companies this is impossible if they only have a very small number of staff?

[Acid]

You are right Tracy , Small companies are often unable to afford such a procedure. Some small companies even dont have an internal audit department.

Acid

[Vandana]

yes you are right Tracy - some say that the owner of the business is probably heavily involved so there is less need for segregation of duities. In practice it is impossible for a small business. However, as a business grows, it should try to segregate duties for the reasons above.

[sash_lar]

Segreagation of duty is when there are check and balance of a system. That is:
1) There is a separate person to verify what has been done. Some to ensure that the proper procedure is followed.
2) There is a separate person to do another aspect of a work. Example two signature for on a cheque/check. This is to ensure that one person will not be able to misappropriate any funds. However this can be override if a person forge the signature or crack a password but this will have legal implication.

Disadvantage
It is costly, as more persons will have to be hired
It is not full proof and therefore the integrity of person will still have to relied on.

Advantage
It is harder for person to misappropriate funds
Missappropriate may be easier to be identified as there is a particular sequence that has to be followed with segregation of duty therefore the broken sequence will give rise to probabity.

[Payal]

Another activity where segregation of duties is critical is setting up supplier accounts on the system. Procurement should ideally not be setting up supplier accounts and also in the finance team, the accounts payable person should not be entering / amending bank details of suppliers. This person should also not have access to setting up new accounts as there can be chances where they set up a dummy account with their own bank details and raise dummy invoices of small values which may get paid. So as mentioned above there should be checks and balances. Also having one finance signatory and one non finance signatory seems to be a better control over payment procedures.

[vetrivel]

hi can i join your team

[Acid]

Welcome to our team!

Wish u all the best!