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

Quizplus · Accepted Answer

Proper segregation of functional responsibilities requires that three functions be separated: authorization, recording, and custody. This segregation is necessary to ensure that no single individual can both perpetrate and conceal errors or irregularities in the normal course of his or her duties. The segregation of these functions is especially important for cash and other high-risk transactions. Option A and D do not include recording function while option C does not include the authorization function in its segregation statement, hence options A, C, and D are incorrect.

Proper Segregation of Functional Responsibilities in an Effective System of Internal