Audit evidence Q6

VTC Ltd discovered that some bank balances of its factory in the Mainland was unaccounted for and a finance manager was suspected to have been involved. The loss has been reported to the local police. The police were trying to locate the finance manager. Initial findings of the investigation indicated that the loss amount was approximately HK\$20 million. VTC Ltd's management investigated the cause and nature of the loss of funds in the factory and identified that the finance manager stole the company chop and issued a few cheques to withdraw money from VTC Ltd's bank account to his personal bank account. Then, the finance manager removed these transactions from the bank statements downloaded from the internet banking facility before sending them to the head office in Hong Kong. Required: (a) Identify the possible internal control deficiencies relating to the misappropriation of funds by the finance manager. (b) Suggest the relevant control activities management should have implemented to address the deficiencies identified. VTC Ltd discovered that some bank balances of its factory in the Mainland was unaccounted for and a finance manager was suspected to have been involved. The loss has been reported to the local police. The police were trying to locate the finance manager. Initial findings of the investigation indicated that the loss amount was approximately HK\$20 million. VTC Ltd's management investigated the cause and nature of the loss of funds in the factory and identified that the finance manager stole the company chop and issued a few cheques to withdraw money from VTC Ltd's bank account to his personal bank account. Then, the finance manager removed these transactions from the bank statements downloaded from the internet banking facility before sending them to the head office in Hong Kong. Required: (a) Identify the possible internal control deficiencies relating to the misappropriation of funds by the finance manager. (b) Suggest the relevant control activities management should have implemented to address the deficiencies identified