What is the primary purpose of separation of duties in an organization?

• A. To allow employees to specialize in one task only
• B. To increase the speed of processing financial transactions
• C. To minimize the need for employee training
• D. To reduce the risk of fraud by ensuring no single individual controls all aspects of a financial transaction

Answer: (D)

Verified step by step guidance

1. Understand the concept of separation of duties: Separation of duties is a fundamental internal control mechanism in financial accounting and organizational management. It involves dividing responsibilities among different individuals to ensure that no single person has control over all aspects of a financial transaction.
2. Identify the primary purpose: The main goal of separation of duties is to reduce the risk of fraud and errors. By splitting tasks, it becomes harder for any individual to manipulate financial records or commit fraudulent activities without detection.
3. Analyze the incorrect options: The other choices provided in the problem (specialization, speed of processing, and minimizing training needs) are not the primary purpose of separation of duties. While these may be secondary benefits, they do not address the core reason for implementing this control.
4. Relate separation of duties to fraud prevention: When duties are separated, it creates a system of checks and balances. For example, one employee might handle cash receipts, another records transactions, and a third reconciles the accounts. This division ensures accountability and transparency.
5. Conclude with the correct answer: The correct answer is 'To reduce the risk of fraud by ensuring no single individual controls all aspects of a financial transaction,' as this aligns with the primary purpose of separation of duties in an organization.