Case: Segregation of Duties

An effective system of internal control includes the segregation of incompatible duties. Some of the examples presented represent incompatible duties. Comment on the specific risks (if any) that are caused by the combination of tasks.

1. The treasurer, Gayzelle Calma, has the authority to sign checks but gives the signature block to the assistant treasurer to run the check-signing machine.
2. Russel, the warehouse clerk, who has custodial responsibility over inventory in the warehouse, may authorize disposal of damaged goods.
3. The sales manager, Sara Cider, who works on commission based on gross sales, approves credit and has the authority to write off uncollectible accounts.
4. Louis Mendoza, the shop foreman submits time cards and distributes paychecks to employees.
5. The accounting clerk, Justine, posts to individual account receivable subsidiary accounts and performs the reconciliation of the subsidiary ledger and the general ledger control account.