Segregation of Duties, Auditing, and Reporting

Introduction

The phrase, “with great power and authority comes great responsibility,” introduces the concept of segregation of duties (or SOD). For organizations and corporations, data has huge value. More than gold, a minor leak of confidential information could potentially devastate data security, begin controversies, and cripple the firm’s brand image and sales.

Thinking that security breaches and data leaks only occur through cyber attacks and exploits as humans cause security breaches. Human errors, alienated or angry workers could physically make changes to enterprise systems which could essentially jeopardize data security and leak certain confidential information, which, as mentioned before, could be catastrophic to a corporation. Therefore, firms implement segregation of duties, auditing, and reporting amongst their labor force to restrict this.

Definition

As the name hints, segregation of duties is the concept where access to information is divided into many insignificant parts and allocated to the labor force, which automatically cripples the possibility for any employee to commit any fraud or unlawful act against the company regarding data security. This concept promotes centralized leadership where the top management holds most of the authority and control, and others who exist lower in the hierarchy should not have enough authority or access to inflict harm to the organization itself.

How to Set Up Segregation of Duties, Auditing, and Reporting

It is not only the segregation of duties but also the division of auditing and reporting. Each employee who has a particular duty and degree of access allotted to them will only report their work in their day-to-day job. The collation of all reports and audits will form the bigger picture. SOD runs for main pillars:

  1. Authorization: First, the employees must know the limits of their power. This can be done by authorizing their systems to have only a part of the information, enough to fulfill their daily requirements in their day-to-day job.
  2. Reconciliation: This factor removes the disadvantage of having no communication between workers. Reconciliation allows employees to communicate about particular findings that another employee requires to complete their part of the job to complete their task and report.
  3. Record-keeping
  4. Custody

Example

The segregation of duties, auditing, and reporting is a common application in enterprises specializing in asset management, financial services, or the finance department in an organization. When money is involved, protection against fraud is the organization’s paramount priority. Therefore division of work is very crucial. For instance, one employee only calculates the accounts payable, and the other does not.

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