Segregation of Duties

This internal control concept relates to my last posting because bookkeeping falls under its guise.

Segregation of duties is where the worker at the cash register is never the person who counts the drawer at the end of the day and compares the amounts to the receipts, it’s where the bookkeeper that prints the checks never has signature authority, and where the guy working in the warehouse is never allowed to do purchasing or inventory counts.

In the last 10 years I have been involved with three clients in the Naples area who were robbed by their warehouse men because they did not take periodic inventory. One of the robbers even started driving his corvette to his $10 and hour job. The two other instances were both floor covering warehouses where the warehouse guys were installing carpet on the side for cheap because their materials were all stolen from their employers. In all three cases the clients estimated that they had each lost more than $125,000 due to these defalcations, and in all three cases the owners could not bring themselves to press charges.

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