Which of the following best describes the concept behind separation of duties in establishing internal controls?

• A. Allowing one employee to handle all accounting tasks to increase efficiency.
• B. Implementing physical barriers to prevent unauthorized access to assets.
• C. Requiring management approval for all transactions regardless of size.
• D. Dividing responsibilities among different employees so that 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' in internal controls. This principle ensures that no single individual has control over all aspects of a financial transaction, reducing the risk of errors or fraud.
2. Analyze the options provided in the question. Eliminate choices that do not align with the definition of separation of duties.
3. Option 1: 'Allowing one employee to handle all accounting tasks to increase efficiency' contradicts the principle of separation of duties, as it centralizes control.
4. Option 2: 'Implementing physical barriers to prevent unauthorized access to assets' relates to physical security, not the division of responsibilities.
5. Option 3: 'Requiring management approval for all transactions regardless of size' focuses on authorization but does not address the division of tasks. The correct answer is the option that emphasizes dividing responsibilities among employees to ensure no single individual controls all aspects of a transaction.