Explain how segregation of duties is considered to be an important element of internal controls?

Segregation of dutiesis a crucial concept for improving a company's system of controls. Under this concept, the person handling an accounting transaction is different from the person recording the transaction. By using the separation of duties, it is much more difficult to commit fraud, since at least two people must work together to do so - which is far less likely than if one person is responsible for all aspects of an accounting transaction.

SOD involves breaking down tasks that might reasonably be completed by a single individual into multiple tasks so that no one person is solely in control. Payroll management, for example, is an administrative area in which both fraud and error are risks. A common segregation of duties for payroll is to have one employee responsible for the accounting portion of the job and someone else responsible for signing the checks. 

Although it improves security, breaking tasks down into separate components can negatively impact business efficiency and increase costs, complexity and staffing requirements. For that reason, most organizations apply SoD to only the most vulnerable and the most mission critical elements of the business.