Final answer:
The correct set of accounting functions to be separated for segregation of duties is 'Recording, authorizing, custody of assets'. Segregating these functions ensures that no single individual has control over all aspects of a financial transaction, reducing the risk of fraud and errors.
Step-by-step explanation:
The correct set of accounting functions that must be separated for effective segregation of duties is b. Recording, authorizing, and custody of assets. In accounting, this principle is essential to prevent errors or fraud in the financial statements. By separating these functions, one individual or department does not have control over all aspects of a financial transaction, which reduces the risk of misappropriation of assets or inaccurate financial reporting.
Recording refers to the act of entering financial transactions into the accounting system. Authorizing is approving transactions and ensuring they are valid and in line with company policy. Lastly, custody of assets denotes the physical possession or the ability to directly control those assets. When these responsibilities are segregated, it diminishes the likelihood of one person being able to commit and conceal inappropriate actions that could harm the organization.