The Segregation of Duties is imperative. But so is the balance for efficiency too. How can finance departments manage the time pressures? 

The details – that’s where …

The Devil is in the details. Yet, because it is details upon details, again and again, you may not see the wood for the trees, however experienced you are.

It is difficult for even the skilled preparer to eliminate cognitive bias (assuming you are right). Why? Because it just looks right. It is also difficult for the approver to eliminate cognitive bias – because not only does it look right to them too – but wasn’t it done by a skilled preparer?

Segregation of duties (or Separation of Duties) is critical to effective internal control because it reduces the risk of mistakes and inappropriate actions, and because it helps fight fraud by discouraging collusion.

The Segregation of Duties is essential for the Audit Trail function. For instance, it should be possible for a reviewer (internal or external, such as a Chartered Public Accountant) to recreate what has happened by whom, when and how. The second approver needs to fulfil the same functions: to take up a prepared reconciliation, check its details, and to drill down to see what has been done and check it. If correct, the approver can securely sign it off.

segregation of duties, finance department, financial reconciliationThe unresolved balance of Segregation of Duties

But there has to be a balance too. A balance between Segregation of Duties and the increased effort and costs it takes.

After the scandal of Enron, where Sarbanes Oxley Act is an example of the extreme legal consequences for us in the financial department, it has become so important that the reported numbers are correct. Due to its importance, not only do the reported numbers have to be correct, we must also be able to show that our procedures are watertight too – that any fault would be caught internally.

But we cannot.

Reconciliations are so often done in Excel. You may “read and write” protect files, but how can you ensure that only one person prepares one specific account in a shared Excel file? How can you ensure no-one else comes in and changes anything? How can you ensure numbers are not accidentally erased or altered by someone else?

Some say that it’s the printed and signed off reports that does it. But in order to properly check and approved the supporting documents, the sums and calculations behind the results, you need to be able to go into the account details to check – and then, having it all on paper makes it far too time-consuming.

As for sampling, you take some of the accounts (prepared and signed off) and check them thoroughly. For that you need the details and the knowledge that no-one else has fiddled with the numbers, the supporting documents, etc. The same goes for the external reviewer – the Chartered Public Accountant – whom not only will check the reconciliation but the procedure too.

That is where the balance of Segregation of Duties and the increased effort and cost, is an impossible balance for so many companies.

Hence, we all know the essential demand but find it impossible to complete it. The lack of trust in the reported numbers by Chief Financial Officers (with even less trust from preparers) being a significant finding in this research.

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Resolve the unresolved, achieve the SoD that more than balances

BALANCER, from Adra Match can be said to dissolve all the needs described above, where a superior Segregation of Duties is already built in. Not as additional steps, but as a recorder silently watching the work all preparers, approvers and reviewer do, while they all simply enjoy the straightforward tools for carrying out the Month End Close reconciliation.

And there are other benefits too. There has been a great fuss about having accounting software in the Cloud, and of course, in the “Cloud” is where you find BALANCER.

Check out the full range of benefits BALANCER provides in this short balance sheet reconciliation software demonstration video.

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