Segregation of Duties (SoD)
An internal control that distributes critical financial tasks among multiple people to prevent fraud and errors.
Definition
Segregation of duties is a fundamental internal control principle that ensures no single person has control over all phases of a financial transaction. In AP, this means separating vendor setup, invoice entry, approval, and payment execution among different individuals to prevent fraud and detect errors.
Why It Matters
Without SoD, a single person could create a fictitious vendor, enter a fake invoice, approve it, and issue payment to themselves. SoD is required for SOX compliance and is an audit focus area.
Examples
AP segregation
Person A creates vendors, Person B enters invoices, Person C approves payments, Person D executes payments. No one controls the full cycle.
SoD violation
An AP clerk who can both create vendors and process payments has conflicting duties that create fraud risk.
How Nexus AP Helps
Nexus AP enforces segregation of duties through role-based access controls, preventing users from performing conflicting activities.
Start Free TrialFrequently Asked Questions
What AP duties should be segregated?
Vendor master maintenance, invoice entry/processing, invoice approval, payment authorization, payment execution, and bank reconciliation should all be performed by different people.
What if our team is too small for full SoD?
Use compensating controls: management review, system alerts, regular audits, and automated exception reports to mitigate risk when full segregation is not feasible.
Category
complianceRelated Terms
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