 will be appropriate given the size and the maintenance or the people that are involved within that organization. All right, segregation of duties. Inventory management function is segregated from the cost accounting function. So inventory management separate from the cost accounting. Why? If they weren't segregated, production and inventory costs can be manipulated. So if you have the same person that's gonna be involved in the inventory management function and is also doing the cost accounting function, then the production of inventory costs can be manipulated. And again, this is kind of the interesting factor for most people to actually think about where could fraud take place? And then for us as the auditor, we've got that kind of skeptical viewpoint that we have to have basically when we're designing or thinking about internal controls or auditing them. Where could fraud take place? And then what can we do in order to set up internal controls to reduce it and how can we test for those controls? So this may result in an over or understatement of inventory and net income. Then we have the next segregation. Inventory stores function is segregated from the cost accounting function. So inventory stores function, segregated from the cost accounting function. If they weren't segregated, under authorized shipments can be made. So that wouldn't be good. We can have the unauthorized shipments if we had the one person involved with those two items and the theft of goods can be covered up. Obviously inventory is something that's not as liquid as cash, but it's something that is fairly liquid and it depends on what type of inventory we have. So it's something that could be subject to theft and we wanna make sure that we have the proper safeguarding and controls over the inventory as well. And that of course includes segregation or separation of duties. Then we have cost accounting function is segregated from the general ledger function, cost accounting separates from the general ledger. If not segregated, it is possible to conceal unauthorized shipments. If that wasn't the case, it's possible for one person in charge of both things to conceal unauthorized shipments. And again, as you think of these things, you might say, well, one person wouldn't do that. I know the person involved. I know everybody involved in this, but notice as the companies grow, we don't possibly know everybody personally involved in the situation. And maybe that's good to some degree because we want to have basically some kind of checks and balances, some separations within basically the systems. The larger systems are gonna have that separation of duties. You gotta have it. And also, if we don't have the separation of duties, remember that if they're not separated, the likelihood for someone to just realize that they could have the opportunity to commit fraud and not be caught once that's been realized. And if that's coupled with a problem situation for individuals, they're more like financial problems or something, they're more likely to commit fraud. We would rather not have the temptation even be involved there. And therefore, you wanna make sure to have the separation of duties and the fraud prevention in place, the good controls. So Costa County function is separated from the general ledger function. If it wasn't, it is possible to conceal unauthorized shipment. This can result in the theft of goods causing overstatement of inventory. Then we have the responsibility of supervising physical inventory. So we're supervising the physical inventory separate from the inventory management and inventory stores function. So if they weren't segregated, it's possible that the inventory shortages will be covered up through the adjustment of the inventory records to the physical inventory. So notice once again, responsibility for supervising the physical inventory is separate from the inventory management and inventory stores function. Because if it's not, it's possible that the inventory shortage will be covered up through the adjustment. You can adjust the inventory records to the physical inventory. This could result in an overstatement of inventory. So here we have our segregation of duties. Now we're gonna post this out in a table type of format. So we have the function over here and then we've got the area that will be involved including inventory management, raw materials, finished goods, storage, cost accounting, IT. These are different areas that of course we'll be doing different things. That's the point. So we have the function of making of production schedules. That's gonna be in the inventory management, the making of the production schedules. Then the issuing materials requisition. That's gonna be in the raw materials stores. So that's a different area. And then we have the update cost records with the materials, labor and overhead usage. That's within cost accounting often helped by IT as needed. And then we have the updating inventory records. That's gonna be in cost accounting and IT as needed. Release of goods to the shipping department. So now we got the goods released to the shipping department, finished goods stores. So that's gonna be a separate location. And then the approval and issuance of the purchase requisition that done in the inventory management.