What is the purpose of segregation of duties?

The correct option highlights the critical role of segregation of duties in organizational governance and risk management. The primary purpose of segregation of duties is to mitigate risks associated with fraud and errors by distributing responsibilities among different individuals. By ensuring that no single person has control over all aspects of a financial transaction or operational process, the organization establishes a system of checks and balances. This division makes it significantly more difficult for an individual to commit and conceal fraud, as collusion would be necessary to override the controls in place. Moreover, it reduces the chance of unintentional errors, as tasks are performed by different personnel who can catch potential mistakes.

This approach not only protects assets but also fosters accountability, as employees understand that their actions will be monitored by others. Overall, the effective implementation of segregation of duties is a fundamental internal control mechanism that enhances the integrity of financial reporting and compliance within an organization.