What is the primary reason for establishing segregation of duties (SoD) controls in an enterprise?

What is the primary reason for establishing segregation of duties (SoD) controls in an enterprise?

• A. To restrict users to the minimum level of access required to perform their jobs
• B. To ensure that transactions which violate corporate policy are logged for review
• C. To restrict users to working on systems that reflect their area of expertise
• D. To ensure that any fraudulent activity requires collusion

Answer: (D)

The primary reason for establishing segregation of duties (SoD) controls in an enterprise is to ensure that any fraudulent activity requires collusion. This means that for a fraudulent act to occur, more than one individual would need to be involved, making it significantly more challenging to execute undetected. By dividing responsibilities among different individuals or groups, organizations create a system of checks and balances that reduces the risk of fraud and error. For example, if one person is responsible for both initiating a transaction and approving it, they could potentially manipulate that process without oversight or accountability. However, by having separate individuals handle these tasks, the chances of fraudulent activity being carried out without detection decrease, as it would require both parties to conspire together, which is far less likely. This mechanism is an essential part of internal control systems, as it aims to protect assets, ensure accurate financial reporting, and maintain compliance with legal and regulatory requirements. Therefore, the effective implementation of SoD helps organizations mitigate risks associated with fraud and enhances overall operational integrity.

The primary reason for establishing segregation of duties (SoD) controls in an enterprise is to ensure that any fraudulent activity requires collusion. This means that for a fraudulent act to occur, more than one individual would need to be involved, making it significantly more challenging to execute undetected. By dividing responsibilities among different individuals or groups, organizations create a system of checks and balances that reduces the risk of fraud and error.

For example, if one person is responsible for both initiating a transaction and approving it, they could potentially manipulate that process without oversight or accountability. However, by having separate individuals handle these tasks, the chances of fraudulent activity being carried out without detection decrease, as it would require both parties to conspire together, which is far less likely.

This mechanism is an essential part of internal control systems, as it aims to protect assets, ensure accurate financial reporting, and maintain compliance with legal and regulatory requirements. Therefore, the effective implementation of SoD helps organizations mitigate risks associated with fraud and enhances overall operational integrity.