CCEP Certification Practice Exam 2026 – Complete Study Resource

Segregation of duties is a fundamental principle in compliance and internal controls aimed at minimizing the risk of errors, fraud, or misconduct. By dividing responsibilities among different individuals, this approach ensures that no single person has control over all aspects of a financial transaction or compliance process. This division of labor creates a system of checks and balances within an organization.

When multiple individuals are responsible for different stages of a process, it becomes more difficult for fraudulent activities to go undetected. For instance, if one individual is responsible for authorizing a transaction while another processes it and a separate person reviews it, the likelihood of improper actions occurring without detection is significantly reduced. This method fosters accountability and transparency in operations, which is vital for maintaining compliance with regulations and policies.

In contrast, combining roles might lead to efficiency in some cases, but it significantly increases risks associated with oversight. Assigning all tasks to a single employee can create gaps in monitoring and controls, enhancing the potential for errors and mishaps. Regularly rotating staff, while beneficial for training and fresh perspectives, does not directly address the need for a controlled environment where duties are properly segregated to protect against misconduct.