Segregation of duties (SoD) refers to the enforcement of a separation between the steps in a process involving transaction processing and any one of the following:
- access to an organization’s resources;
- writing and changing records; or
- authorization to approve transactions.
Segregation of Duties is required by regulations such as Sarbanes-Oxley Act (SOX), PCI DSS, and ISO 27001. Segregating duties involves dividing different transaction processing elements among multiple roles within an organization so that no single individual can carry out all responsibilities related to which he/she has sole control.
It ensures that more than one individual is involved in critical steps of a process, and no one person can control the entire process.
What is SoD Software?
Segregation of Duties software ensures that all critical access to sensitive data is appropriately segregated across the multiple users who carry out a transaction.
Not only does it help meet compliance mandates, but it also helps companies implement best practices by automating segregation of duties for high-risk functions such as finance and accounting, human resources, procurement, sales, and marketing.
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The result is better control over financial reporting processes and enhanced business intelligence (BI). The software can be used with any third-party applications or custom-built applications.
The Benefits of SoD Software
SoD software allows organizations to automate SoD procedures within an application or across enterprise systems. This simplifies governance requirements and reduces risk exposure because human error is taken out of the equation.
Furthermore, it streamlines business processes since there is no need to pass data back and forth between applications.
The Risks of Not Having SoD Software
Data breaches, embezzlement of funds, and intellectual property theft are risks of not having SoD software. All of these can happen when employees have access to more than one role in a transaction process that has no controls in place. The result is that corporate losses go unreported or unverified.
Most Common Form Errors Resulting from Segregation of Duties:
Errors Resulting From Data Entry and Manual Manipulation
These could include errors such as incorrect figures entered by mistake, which remain undetected until an independent party reviews the records.
Transactions made without management approval because they were mistakenly logged into or approved by another person, and entering or approving transactions without real knowledge about the related steps involved leads to wrong conclusions later on.
Errors Resulting From Multiple Responsibilities
Involve making or changing entries in which one person carries out more than one function simultaneously without documenting the changes made by another individual; transactions are approved with inaccurate supporting documentation because no verification of accuracy took place before approvals were granted.
Errors Occurring at Different Stages of a Transaction Process
Earnings aren’t recorded correctly because relevant data was overlooked due to poor internal controls, pressure to meet deadlines or too many distractions that cause individuals to concentrate on single functions only.
Transactions are entered inaccurately due to work overload, so an individual cannot properly review the information before approving them.
Why do Organizations Implement SoD Software?
Many companies put their critical financial transactions through custom-built legacy systems because they are familiar with them and don’t know where else to go.
As a result, many continue to operate these older systems that were never designed for today’s security standards or compliance rules. This creates risks across an entire enterprise due to the potential access abuses of multiple users within the system.
Implementing SoD software can help organizations get rid of costly specialized accounting software while reducing risk by automating segregation of duties processes in any application or across proprietary applications throughout an organization.
Additionally, it provides a single view of data and enables the automation of critical lookups.
Segregation of duties is a critical part of the compliance process. To reduce risk and ensure accuracy, organizations need software solutions that not only give them real-time alerts but take out as much manual work as possible from their processes.
SoD software does just this for companies by reducing errors in business data, improving management oversight and knowledge of daily activities, and reducing costly specialized accounting software.