Final answer:
The three rules to ensure no single employee completes a transaction are Segregation of Duties, Transaction Review and Approval, and Dual Control. These principles are part of internal controls designed to prevent errors and fraud by spreading responsibilities among different people or departments.
Step-by-step explanation:
Internal Control Principles for Transaction Processing
The question pertains to the internal control principles within a business or organizational context. There are indeed specific rules in place to ensure that no single employee or department processes a transaction from start to finish, which helps to prevent errors and fraud. These rules are part of a larger concept known as 'segregation of duties' or 'division of labor', and they are critical for maintaining a sound internal control system.
Three key rules, or principles, are:
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- Segregation of Duties: This rule ensures that tasks are separated among different individuals or departments, so no single person has complete control over all aspects of any financial transaction. Functions like authorizing transactions, recording them, and handling related assets should be separated. This reduces the risk of intentional manipulation and unintentional errors.
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- Transaction Review and Approval: Transactions should be approved by someone other than the person who initiated or recorded them. This provides a second set of eyes, which can help catch mistakes or intentionally deceptive practices.
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- Dual Control: For sensitive transactions, especially those involving cash or high-value items, dual control by having two or more employees jointly responsible for a transaction is essential. This further divides the responsibility and deters collusion between employees.
Implementing these rules minimizes transaction costs by preventing costly errors and fraud. It also helps to balance out the conformity costs since it requires individuals to work within an established set of checks and balances that discourages wrongful behavior.