An accounting control: separation of duties

Let’s talk about an accounting control. Separation of duties is an accounting control to prevent deception in accounting, embezzlement or fraud. Anything that would harm the finances of the company.

I never really dealt with these types of control issues, so I am not really familiar. I performed a lot of auditing to make sure that the proper accounting was done or that nothing fell through the cracks but I didn’t deal with accounting duties.

The only thing I know of might come under accounting control, although I have never heard of it expressed elsewhere, is the separation of forecasting from revenue accruals. You don’t want one person doing both the forecasting and the revenue accruals because under pressure, the person could book revenue to match his forecast. I don’t have proof, but I think I saw that at one company. You don’t want false accounting entries.

Examples of accounting control

I asked CoPilot to provide some examples as I could not think of anything right off the top of my head after 10 pm.

So, here’s some examples of separation of duties to prevent one person having too much control and thus have an ability to do nefarious things.

• One person approves the payment and the other does the actual disbursement. This separation prevents one person from being able to approve and then make actual disbursements.
• HR inputs employee salary data and finance makes the actual salary disbursement. This separation prevents changes to payroll data.
• To prevent someone being able to manipulate inventory records, one person orders the inventory, the other receives the order, and the third does the accounting for order and receipt.
• One person does the bank reconciliation while another person does the cash receipt or actual disbursements. This separation enables one to detect any discrepancy between bank’s records and the company’s books.
• For the IT arena, one may create user accounts while another authorizes permissions. This separation prevents unauthorized access to private information.
• To prevent one person being able to work the entire purchasing process, companies will separate the purchasing process into requisition, approval, and purchasing.

Treasury probably has the same accounting controls

The reason why I mentioned separation of duties as a control feature of accounting is the news has reported that Elon Musk’s cronies tried to gain access to the Treasury payment systems.

These people are unelected people, are unconfirmed by Congress, and do not represent the will of the people. As I understand it, they are simply employees of Elon Musk, so they have no business accessing the payment system.

Furthermore, Elon Musk, and thus by inference his employees, has millions if not billions of dollars in government contracts. The person, or employees, doing contract work for the government should not have access to the Treasury payment systems. They could turn off payment to their competitors. They could learn how much their competitors are receiving from the government for the work. They could learn personal details about Social Security recipients.

If Elon did not like someone, he could decide to turn off payments to them.

No finance person whose reputation depends on being up and up, on being trustworthy and reliable, would ever countenance this situation. I’m under the impression that the newly confirmed head of Treasury ok’d this, and I don’t understand why. As a person coming out of finance, even if it was Wall Street, he should know better.

Accounting controls dictate Musk cronies should not have access

I’m going to flat out say he doesn’t have enough maturity to be accessing the payment system. He is too thin skinned and is prone to lying and attacking.

One shocking event that opened my eyes to his sensitivity was the drama with the scuba diver and the Thai caves rescues. Apparently, Musk felt slighted and returned the favor by lying and calling the scuba diver a pedophile. That was one worrying incident.

Then there’s the battle with video gamers. Musk bragged to Joe Rogan about being number one in some video game; however, gamers called him out for hiring players to boost his place on the leaderboard. So, is he playing the game or is someone else pretending to be him? He is wealthy; he already has fame. Why does he need to do this?

I don’t know…the guy does not come across as having enough maturity. He may be a genius, although I’m starting to have some doubts about that, but genius does not equate to maturity.

As an example, I went to Rice University, which has been called the Harvard of the south. Very intelligent students but one night, they threw a small refrigerator off the 6th floor.

Intelligent but not very mature.

What happens next?

I’m hoping somebody wise up and say that Musk’s people cannot have access to the payment system. Just from a typical accounting control, that is a no-no. It just simply cannot be.

Updates

Last night, right after I finished and posted this post, this Wired article came up in my newsfeed: The Young Inexperienced Engineers Aiding Elon’s Takeover of the Government.

We have young boys barely out of college having access to our private data in the Treasury payment system (if I’m understand the situation correctly.) They are apparently also trying to access classified data.

As one source put it: “this feels like a hostile takeover of the machinery of governments by the richest man in the world.”

All of these boys appear to have interned or worked for Musk or maybe even Peter Thiel. It feels like an inside group grabbing control of the government mechanism.

My education in accounting and finance is throwing up red flags at the lack of separation of duties necessary to maintain integrity of information and processes. This feels irresponsible to me.

The boys may be geniuses, but they feel immature, just like those at Rice University. The whole situation is very dangerous and could end very badly. I hope an adult will step up.