CPFO Accounting Practice Exam 2025 - Free Accounting Practice Questions and Study Guide

The ideal method for segregating incompatible duties is to distribute these responsibilities among different departments. This approach enhances internal controls by minimizing the risk of fraud or error that can arise from having one individual or team handling all aspects of a particular function. By assigning different aspects of a financial process, such as authorization, custody, and record-keeping, to distinct departments, the organization creates a system of checks and balances. This makes it more difficult for anyone to commit fraud without detection, as oversight is inherently provided by the separation of duties across departments. This method leverages the principle of accountability and provides an added layer of scrutiny, ensuring that no single individual has control over all facets of a financial transaction or reporting process. This organizational structure also fosters a culture of transparency, which is critical for effective financial management and compliance.