SEGREGATION OF DUTIES QUESTIONNAIRE:

FINANCIAL CONTROLS

As part of our annual internal audit plan, we review basic financial controls. This segregation of duties
questionnaire will help internal audit understand existing business processes and management’s view of the
internal control environment. Please have the appropriate person complete and submit this questionnaire by
(Date).

SEGREGATION OF DUTIES

Adequate segregation of duties reduces the likelihood that errors (intentional or unintentional) will remain
undetected by providing for separate processing by different individuals at various stages of a transaction and for
independent reviews of the work performed. The basic idea underlying segregation of duties is that no one
employee or group of employees should be in a position both to perpetrate and conceal errors or irregularities in
the normal course of their duties. In general, the principal incompatible duties to be segregated are authorization,
custody of assets, and recording or reporting of transactions. In addition, a control over the processing of a
transaction generally should not be performed by the same individual responsible for recording or reporting the
transaction.

TREASURY PROCESS
The handling of cash receipts and accounting for such receipts need to be segregated if all the control objectives
are to be met. For example, those who handle cash receipts would not have the authority to prepare or sign
checks, would not have access to accounting records, and would not be involved in reconciling bank accounts.

The duties to consider when determining the adequacy of segregation of duties among those responsible for cash
receipt transactions are listed in the following chart. In smaller companies, these duties may also need to be
reviewed along with those of other functions, as some individuals may have responsibilities in more than one
area.

List the names of individuals responsible for particular functions in the column indicated. Review the chart for
individuals whose names are listed in more than one column and then make a determination whether that
represents a potential lack of segregation of duties.

Custody of Control
Authorization Recording
Assets Procedure

Opening of mail and listing of checks

Handling of receipts of currency

Preparation of bank deposits

Comparison of listing of checks to bank

deposits

Maintenance of the cash receipts

journal

Maintenance of accounts receivable

records

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 Reconciliation of bank accounts

Authorization of write-offs of
uncollectible accounts

Control of the accuracy, completeness

of, and access to cash receipts
programs and data files

REVENUE PROCESS
The order entry, credit, shipping, billing, collecting, credit memo, IT and general accounting activities need to be
appropriately segregated if all control objectives are to be met. For example, those who perform the order entry
(sales) activity, including those who maintain contact with customers and issue sales orders, should not perform
any credit approval, shipping, billing, cash receipts, credit memo or accounting activities.

The duties consider when determining the adequacy of segregation of duties among those responsible for sales
transactions are listed in the following chart. In smaller companies, these duties may also need to be reviewed
along with those of other functions, as some individuals may have responsibilities in more than one area.

List the names of individuals responsible for particular functions in the column indicated. Review the chart for
individuals whose names are listed in more than one column and then make a determination whether that
represents a potential lack of segregation of duties. Also consider whether individuals are performing incompatible
duties within the same column.

Custody of Control
Authorization Recording
Assets Procedure

Issuance of sales orders.

Approval of credit.

Approval of access to credit-related data

files.

Authorization of shipments.

Preparation of shipping documents.

Handling of inventories for shipment.

Preparation of billings.

Verification of billings.

Approval of access to pricing-related

data files.

Accounting for the numerical sequence

of sales invoices.

Maintenance of the sales journal.

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 Custody of Control
Authorization Recording
Assets Procedure

Maintenance of accounts receivable

records.

Reconciliation of the accounts

receivable records with the general
ledger control account.

Review and approval of the monthly

aged accounts receivable trial balance.

Preparation of monthly customer

statements.

Review and follow-up of customer

inquiries and differences.

Handling of cash receipts from

customers.

Authorization of write-offs of
uncollectible accounts.

Control of the accuracy, completeness

of, and access to sales and accounts
receivable programs and data files.

PAYROLL PROCESS
Timekeeping, handling the payroll cash disbursements, IT, and accounting for payroll need to be appropriately
segregated if all the control objectives are to be met. Adequate segregation of duties reduces the likelihood that
errors (intentional or unintentional) will remain undetected by providing an accounting check over the payment of
salaries and wages.

The duties to consider when determining the adequacy of segregation of duties among those responsible for
payroll transactions are listed in the following chart. In smaller companies, these duties may also need to be
reviewed along with those of other functions, as some individuals may have responsibilities in more than one
area.

List the names of individuals responsible for particular functions in the column indicate. Review the chart for
individuals whose names are listed in more than one column and then make a determination whether that
represents a potential lack of segregation of duties. Also consider whether individuals are performing incompatible
duties within the same column.

Custody of Control
Authorization Recording
Assets Procedure

Maintenance of personnel files.

Approval of access to personnel master

files.

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 Custody of Control
Authorization Recording
Assets Procedure

Approval of wage and salary increases,

hirings, and terminations.

Control of timekeeping.

Maintenance of payroll journals.

Preparation of payroll checks.

Approval of the payroll.

Signing of checks.

Distribution of checks.

Control of unclaimed payroll checks.

Reconciliation of payroll bank accounts.

Control of the accuracy, completeness

of, and access to payroll programs and
data files.

PURCHASING AND ACCOUNTS PAYABLE

The requisition, ordering, receiving, paying and general accounting activities need to be appropriately segregated
if all control objectives are to be met. For example, those who perform the ordering (purchasing) activity, including
those who maintain contact with outside suppliers and issue purchase orders, should not perform any receiving,
accounting or cash disbursement activities.

The duties to consider when determining the adequacy of segregation of duties among those responsible for
purchasing transactions are listed in the following chart. In smaller organizations, these duties may also need to
be reviewed along with those of other functions, as some individuals may have responsibilities in more than one
area.

List the names of individuals responsible for particular functions in the column indicated. Review the chart for
individuals whose names are listed in more than one column and then make a determination whether that
represents a potential lack of segregation of duties. Also consider whether individuals are performing incompatible
duties within the same column.

Completion of this chart is intended to highlight potentially conflicting duties, not to be the only method of
identifying all such conflicting duties.

Custody of Control
Authorization Recording
Assets Procedure

Issuance of purchase requisitions.

Approval of purchase requisitions.

Issuance of purchase orders.

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 Custody of Control
Authorization Recording
Assets Procedure

Approval of access to vendor master

files.

Approval of purchase orders.

Approval of access to purchase-related

data files.

Issuance of debit memos to vendors.

Issuance and signing of receiving

reports.

Matching of invoices to purchase orders

and receiving reports.

Coding account distribution of vendor

invoices.

Approval of voucher packages for

payment.

Preparation of checks.

Signing of checks.

Mailing of checks.

Maintenance of the purchasing journals.

Maintenance of accounts payable

records.

Reconciliation of the accounts payable

records (or the total of unpaid vouchers)
with the general ledger control account.

Control of the accuracy, completeness

of, and access to purchasing and
accounts payable programs and data
files.

SUMMARY

In general, do you have immediate internal control or other concerns that should be addressed?

Yes  No 

If yes, please describe.

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From your perspective, in what ways can internal audit be of the most value and highest and best use to you and
your organization? (Please be specific.)

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Thank you very much for your time and effort.

Name Title Date

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