What measure can specifically help in preventing employee fraud?

Segregation of duties is a critical internal control measure that helps to prevent employee fraud by ensuring that no single employee is responsible for all aspects of a financial transaction. By dividing responsibilities among multiple individuals, it creates a system of checks and balances that makes it more difficult for any one person to commit fraud undetected. For instance, one employee might be responsible for processing payments, while another handles approvals, and a third manages reconciliations. This division reduces the opportunity for collusion and unethical behavior, as it requires cooperation between multiple employees to approve and execute financial transactions.

Implementing segregation of duties fosters accountability, as employees are aware that their work will be reviewed and verified by others. This oversight not only deters potential fraudulent actions but also enhances the overall integrity of the financial reporting process within an organization. In contrast, allowing a single employee to manage all check approvals increases the risk of fraudulent activities going unnoticed, as there is no independent verification to catch inappropriate actions. Similarly, utilizing a single bank account for all transactions does not inherently create checks against fraud, nor does limiting review processes add any protective measures against improper conduct.