Which option is not one of the three basic functions that should be performed by three different people?

• A. Data entry
• B. Authorization (approval) of transactions
• C. Recording of transactions
• D. Custody of assets

Answer: (A)

Segregation of duties is about having three distinct functions handled by separate people: authorization to approve transactions, custody of assets, and recording of transactions. Data entry is not one of these three fundamental functions; it’s a task that falls under recording. In other words, data entry is the act of inputting details into the records, which would typically be performed by the person responsible for recording. The other two functions—authorization and custody—are separate duties that should be assigned to different individuals to prevent conflicts of interest and reduce the risk of errors or fraud. Keeping these duties separate creates a system of checks and balances: someone approves trans actions, someone else safeguards assets, and someone else records what occurred.