Segregation of Duties (SOD) refers to segregating duties or roles between different users. SOD involves separating individuals who handle different steps of business transactions in order to reduce fraud and errors.  The SAP SOD is an essential internal control system meant to minimize the risk of errors and irregularities, identify problems and ensure the onset of remedial action. All of this can be achieved by making sure that no single person controls all phases of the transaction.

Example: Let's say that the process of disbursing the money is preceded by a series of steps. As a FIRST step, a business MANAGER generally drafts a purchase order (PO) that outlines how a vendor will be paid for the product or service. That vendor must be approved by the purchasing department before payment can be made. A senior manager will usually approve the purchase order. An invoice for products and services must then be ISSUED by the vendor. Prior to signing a check, a person from the accounts payable department needs to approve the invoice. The following diagram illustrates the basic procurement process.

In the diagram, there are four people with different responsibilities. In this workflow, all four people act as CHECKS on each other.

Imagine if one person could carry out all four steps of this process, then he or she would be capable of requesting a purchase, approving it and signing the check. It has unfortunately been observed that employees can misuse this concentration of authority to commit fraud. This emphasizes the importance of segregating duties.