Fundamental Payroll Certification (FPC) Practice Exam

Segregation of duties is a key internal control principle aimed at reducing the risk of errors and fraud. By ensuring that multiple individuals are involved in different phases of a process, it creates a system of checks and balances. This means that no single individual has control over all aspects of a financial transaction or process, which makes it more difficult for any one person to commit fraud or misuse assets without detection.

When multiple individuals handle different phases, such as authorization, custody, and record-keeping, each person's actions can be independently verified by others. This separation of responsibilities not only helps to prevent fraud but also enhances the accuracy and reliability of financial reporting. Thus, this approach serves as a safeguard against asset misuse, ensuring that appropriate oversight is maintained throughout the process.

The other choices do not align with the purpose of segregation of duties; maximizing efficiency or having one individual control all phases could actually increase the risk of errors and fraud rather than prevent them. Comprehensive oversight by a single supervisor also does not provide the necessary checks that segregation of duties promotes.