What is a consequence of failing to separate duties in an organization?

Failing to separate duties within an organization can significantly heighten the risk of errors or fraudulent activities. This principle, known as segregation of duties, is essential in establishing checks and balances. When one person is responsible for multiple key phases of a transaction or process, it becomes easier for errors to go undetected, and the opportunity for fraud increases.

For example, if the same individual is responsible for both recording transactions and handling cash, there is a higher likelihood of misappropriation of funds or manipulation of records. This lack of oversight can undermine the organization’s financial integrity and result in significant losses.

In contrast, properly segregating duties ensures that no single individual has control over all aspects of any significant financial transaction. This not only acts as a deterrent to dishonest behavior but also enhances accuracy and reliability in financial reporting, as multiple individuals are involved in the process and must collaborate for tasks to be completed.