in this document I would like to share how mitigating/compensating controls can be defined from a business point of view. The mitigation only leads to desired results when a potential risk is either properly segregated or properly controlled.
Due to an almost unlimited number of potential segregation of duties conflicts it is necessary to define the important conflicts (for your enterprise) and design and build the rules to identify the risks within GRC. Further it is required that the selected SOD conflicts be addressed via segregation of duties or compensating controls.
Furthermore, it is of importance to consider that segregation of duties is only fully achieved when both implementation of segregation within processes (User A creates a record, while User B reviews it) and proper access rights restriction within SAP applications are simultaneously present.
In case segregation of duties cannot be achieved due to a lack of personnel or other reasons, compensating controls (alternative controls) need to be implemented to minimize the risks of accumulation of duties. These detecting controls are less desirable than segregation of duties which is a prevention control. The following lists the various types of compensating controls that management should consider implementing when there is inadequate segregation of incompatible duties:
- Second signature: e.g. two signatures required to authorize bank payments, salary transfer initiation, purchase orders, etc.
- Review by a supervisor: e.g. the daily journal entries report reviewed and signed by the supervisor of the person responsible for posting the journal entries
- Exception reports: these reports should be reviewed in a timely manner, checked against supporting documents evidencing authorization and signed by supervisor. Some examples of reports (preferably SAP standard reports and system-generated):
- Report of changes performed to G/L accounts -> report of updated/opened GL accounts
- Report of postings recorded on accruals accounts
- Report on pending items resulting from reconciliations (e.g. bank reconciliation, G/L and sub-ledgers reconciliations, etc)
- List of adjustments to a prior period
- Report of payments above a given threshold
- Report of changes perfromed on customer masta data
- etc. etc.
- Independent detailed review of transactions for the department or function. For example, when a user can perform all the key activities of a transaction without adequate segregation of duties, an independent review of the detailed transactions for the department has to be performed on a regular basis to identify, investigate and correct improper/erroneous transactions. This must definitely be done by a second, independent person.
- Random review of transactions: management should periodically review a sample of transactions and compare against supporting documents
Furthermore, it is highly recommended that compensating controls are reviewed and checked for evidence (e.g. if reports have been reviewed) periodically by an independent person (e.g. internal audit) to ensure that alternative controls are working accordingly.
Looking forward to your input in this regard to get also other views from people who are involved in designing process for compensating controls.
Thanks for reading.