Segregation of duties is an internal control principle where no single person controls all aspects of a financial transaction, reducing the risk of errors and fraud.
Segregation of duties (SoD) is a fundamental internal control that ensures no single person has the ability to authorise, record and have custody of a financial transaction from start to finish. The three functions that should be separated are: authorisation (approving transactions), recording (entering transactions in the books) and custody (handling cash, assets or cheques). For example, the person who approves a supplier payment should not be the same person who records it or the person who has cheque-signing authority. In large organisations, SoD is achieved through departmental structure. In small businesses with limited staff, full segregation may be impractical. Compensating controls include owner review of all transactions, mandatory dual signatures above certain thresholds, regular bank reconciliation by someone other than the person who records transactions and using technology for automated checks. SortBooks adds a control by suggesting corrections that you approve before anything is written to Xero, with every change kept in an activity log.
SortBooks helps with the bookkeeping behind segregation of duties by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing segregation of duties by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
Internal controls are processes and procedures designed to safeguard business assets, ensure accurate financial reporting and prevent fraud or errors.
Fraud prevention encompasses the controls, processes and systems designed to detect, deter and prevent fraudulent financial activities within a business.
An audit trail is a chronological record of all financial transactions and changes made in your accounting system. It provides a verifiable history that supports the integrity of your financial data.
Reconciliation is the process of comparing two sets of records to ensure they agree. Common types include bank reconciliation, accounts receivable reconciliation and intercompany reconciliation.
In bookkeeping, compliance refers to meeting all legal and regulatory requirements for financial record keeping, tax reporting and lodgement obligations set by your tax authority.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.