Proper segregation of duties should exist between the various areas of the expenditure cycle. Improper segregation of duties creates opportunity for fraud. Below are four example of improper segregation of duties would create opportunity for fraud.

For each of the four examples below, describe how fraud can be generated if the SAME employee performs all duties in the expenditure cycle. For example, an employee who works in the purchase requesting department could authorizes purchases for his or her own personal use.

One person or department should not perform all the duties in the expenditure cycle. - The original requesting department authorizes the purchase. " The Purchasing Department conducts the purchase. - Accounts Payable processes the payment. " The Accounting Department reconciles the checking accounts involved