Internal controls are designed to prevent fraud, ensure accuracy, and safeguard assets. Which statement about internal controls is typical?

• A. Segregation of duties.
• B. Only annual external audits.
• C. Increasing the speed of all journal entries.
• D. Total centralization of all decision-making without approvals.

Answer: (A)

Segregation of duties is a foundational internal-control practice that reduces the risk of fraud and errors by splitting responsibilities among different people. When authorization, recording, and custody of assets are handled by separate individuals, it becomes much harder for someone to both misappropriate assets and conceal it, because one person would need others’ cooperation to complete a fraudulent act. This division of roles creates built-in checks and balances that support accurate financial reporting and asset protection.

The other options don’t function as typical internal controls: relying only on annual external audits provides external assurance but not ongoing day-to-day control; speeding up journal entries undermines accuracy and accountability; centralizing all decisions without approvals eliminates the necessary oversight that prevents improper actions.