Lesson: Internal Control - Segregation of Duties

In this lesson, Nick Palazzolo takes a deep dive into the foundational principle of internal control: segregation of duties. He elucidates how this concept involves the division of responsibility for physical custody of assets, record keeping, and the authorization of transactions, ensuring that no single individual controls all aspects of any financial transaction. Nick highlights the challenge small businesses face when implementing segregation of duties due to limited staffing and the higher relative cost of additional employees. With a blend of humor and caution, he also discusses how bypassing segregation of duties can potentially lead to fraud, detailing the steps of committing fraud and emphasizing the importance of antifraud measures to prevent, detect, and conceal fraudulent activities. He wraps up with insights on internal threats such as collusion between employees and management override, and how even well-designed controls can be vulnerable to manipulation by those at the top.