How does segregation of duties mitigate fraud risk in property management?

• A. By ensuring no single person can both authorize and misappropriate assets or alter records without checks.
• B. By requiring only one person to handle all steps.
• C. By making all duties external to the organization.
• D. By overlapping duties so one person can control the entire process.

Answer: (A)

Segregation of duties reduces fraud risk by ensuring that no single person controls all steps in a transaction. In property management, this means separating functions like authorizing payments, handling assets, recording transactions, and reconciling accounts. If one person could both approve a payment and misappropriate assets or alter records, there would be no independent check to catch the misuse. By splitting responsibilities, another person must review or handle a different part of the process, creating a system of checks and balances that makes concealment much harder. For example, the person who approves an vendor payment should not be the same person who issues the payment or reconciles the bank statement, and another party should safeguard the physical assets. The other choices weaken controls: concentrating duties in one person, having all steps performed by one individual, moving duties outside the organization, or overlapping duties without independent verification all leave gaps that fraud can exploit.