Name four pairs of functions that should be segregated from each other and explain why the segregation is important.
Listed below are the major functions of the purchasing process.
1) Purchasing function.
2) General ledger function.
3) Invoice-processing function.
4) Disbursement function.
5) Accounts payable function.
6) Requisition and receiving function
1 should be separated from 6 - An individual who performs both of these duties can easily make fictitious purchases and steal cash.
2 should be separate from 5 - The segregation of these duties makes it difficult to cover up defalcation of the company's records.
3 should be separated from 5 - This segregation prevents an individual from overpaying for goods received and stealing cash.
4 should be separated from 5 - Unauthorized transactions can be made by an individual with control over both of these functions. This can lead to unauthorized checks being written and the individual stealing cash.
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