Question

explain why separation of duties is often described as the cornerstone of internal control for safeguarding assets. describe what can happen if the same person has custody of an asset and also accounts for the asset

separation of duties is for safeguarding assets. the person who

Explanation:

Separation of duties is a fundamental principle in internal control. It ensures that no single individual has complete control over a transaction from initiation to recording. When custody of an asset (e.g., handling cash, inventory) and accounting for that asset (recording transactions in the books) are separated, it creates a system of checks - and - balances. If one person has both custody and accounting responsibilities:

• Fraud risk: They could misappropriate the asset (e.g., steal cash) and manipulate the accounting records to cover up the theft. For example, if a cashier also records cash receipts, they could pocket some cash and under - record the total receipts.
• Error risk: Without a second - set of eyes (from a different person handling accounting), errors in asset management (e.g., incorrect inventory counts) may go undetected in the accounting records.

Answer:

Separation of duties is crucial for safeguarding assets. The person who has custody of an asset should not have accounting responsibility for that asset to prevent fraud and detect errors.