Proper segregation of functional responsibilities in an effective system of internal control calls for separation of the functions of:
A)authorization, execution, and payment.
B)authorization, recording, and custody.
C)custody, execution, and reporting.
D)authorization, payment, and recording.

Question

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Proper segregation of functional responsibilities requires the separation of the functions of authorization, recording, and custody. The custodian of an asset should not be responsible for authorizing or recording transactions involving that asset. Similarly, the person who has the authority to authorize a transaction should not have access to the physical asset or record transactions in the accounting records. Separating these functions helps prevent errors, fraud, and abuse. Choice A separates payment and execution but does not include recording, which is also an important function to separate. Choice C separates reporting, which is not as critical as recording for internal control purposes. Choice D separates payment and recording but does not include custody, which is also a necessary function to separate.

Proper Segregation of Functional Responsibilities in an Effective System of Internal