Segregation of Duties (SoD) is intended to prevent what type of activity?

Segregation of Duties (SoD) is a key internal control designed to reduce the risk of fraud and errors in financial processes by ensuring that no single individual has control over all aspects of any critical transaction. This control is particularly effective in preventing employee-level fraud, where an employee might attempt to misuse their position to divert funds or alter records for personal gain. By splitting responsibilities among different individuals—for example, one person initiating a transaction, another authorizing it, and a third person reviewing it—SoD makes collusion more difficult and increases the chances of detecting any fraudulent activities early on.

The other options, while important aspects of organizational risk management, are not the primary focus of SoD. Collusion between vendors can happen regardless of SoD if there are inadequate controls elsewhere. Misleading financial reporting may arise from various factors and is not necessarily prevented solely by SoD, as it also requires oversight and proper disclosures. Unauthorized access to assets is better managed through access controls rather than segregation of duties, as it relates to who can access or modify physical and digital assets rather than the responsibilities of transaction processing.