In proper segregation of duties, what is the third function that should be performed by a different person?

In the context of proper segregation of duties, the custody of assets is critical because it helps ensure that no individual has control over all aspects of a financial transaction. Segregation of duties is a key internal control principle aimed at preventing fraud and errors. The third function, which should be performed by a different person, typically involves ensuring that someone other than the person who handles the assets (custody) is responsible for recording transactions and authorizing them.

This separation creates a system of checks and balances. For example, if the same person has the ability to authorize a transaction, record it, and have custody of the assets, there is an increased risk of misappropriation or errors going undetected. Therefore, designating different individuals to handle authorization, recording, and custody helps maintain the integrity of financial reporting and the safeguard of the organization's resources. Thus, ensuring that the custody of assets is handled separately enhances the overall internal control framework of an organization.