Describe segmentation of duties as a fraud prevention measure.

Segmenting duties is a fundamental principle in fraud prevention and internal control systems, emphasizing the importance of assigning distinct responsibilities to different individuals. This approach mitigates the risk of fraudulent activities by reducing opportunities for an individual to manipulate processes for personal gain.

When responsibilities are divided among multiple individuals, it becomes more difficult for any one person to carry out and conceal fraudulent actions, as they would need to collaborate with others to bypass the controls. For example, the processes of handling, recording, and reconciling cash transactions can be separated, so that one individual manages cash receipts, another records the transactions, and yet another reconciles the bank statements. This creates a system of checks and balances, where the actions of one individual are subject to oversight by another, making it more challenging to commit and conceal fraud.

By ensuring that no single person has control over all aspects of a financial transaction, organizations can enhance accountability, promote systematic supervision, and reduce opportunities for fraud to occur. This approach is widely recognized as a best practice in internal controls and is critical in safeguarding organizational assets.