Analysis Report on the Embezzlement of 19 Million Yuan by Meiya Technology's Cashier Over a Decade

Based on the collected information, I will conduct a systematic analysis of the fund embezzlement incident by Meiya Technology’s cashier from the perspective of a professional financial analyst, revealing the financial internal control loopholes exposed by the incident.

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Ke Mou, former cashier of the Shenzhen Branch of Meiya Technology (Guangdong Meiya Tourism Technology Group Co., Ltd.), took advantage of his position to embezzle company funds starting in April 2012, which was only discovered in August 2022 due to abnormal account activity, spanning a period of

. After verification, Ke Mou embezzled a total of from the company, of which 10.8 million yuan has been recovered, and the unrecovered 8.2 million yuan has been fully reserved as bad debt and written off [1][2].

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The most core internal control flaw in this case lies in

. According to the Basic Norms for Enterprise Internal Control, incompatible job separation control requires that each economic business be processed by two or more departments or personnel to form supervision and mutual restraint. However, the cashier of Meiya Technology was able to independently complete fund transfer operations, indicating that:

• Out-of-control fund collection authority
  : The cashier could transfer funds from the company’s Alipay account to their personal Alipay account, exposing serious defects in the account management system [1][2]
• Lack of approval process
  : Such a large amount of fund transfer was not subject to any review or approval procedures
• Failure of mutual restraint between positions
  : The cashier had both the authority to custody and operate funds, violating the basic principle of “internal restraint”

Meiya Technology claimed in its prospectus that it had established an account management system, but the incident exposed that the system existed in name only:

Type of Loophole	Specific Performance	Risk Level
Account Opening	No effective separation of electronic payment accounts	Extremely High
Account Change	No multi-level approval required for changes in account ownership	Extremely High
Account Monitoring	No abnormal fund flow detected for ten years	Extremely High
Reconciliation Mechanism	Bank reconciliation and fund verification were formalities only	High

The internal control and anti-fraud design of enterprise financial processes must first address the issue of unreasonable corporate organizational structure. If the finance department is subject to the business department or leadership, even the most standardized and detailed system will exist in name only, and fund security risks will easily arise [3].

The failure to detect the fund embezzlement for a decade reflects the complete failure of Meiya Technology’s internal control supervision mechanism:

• Lack of daily monitoring
  : The company did not establish an effective real-time monitoring system for fund flows
• Absence of internal audit
  : No targeted special financial audit was conducted in the ten years
• Lagging external supervision
  : The problem was only exposed due to external regulatory inquiries
• Failure of early warning system
  : Abnormal flow of large amounts of funds did not trigger any early warning mechanism

From the timeline, it took as long as ten years from Ke Mou’s first embezzlement to the discovery, which fully indicates that Meiya Technology has serious internal control risks in its finance department [1].

Authorization and approval control requires enterprises to clarify the authority scope, approval procedures, and corresponding responsibilities of each position for handling businesses and matters in accordance with the provisions of routine authorization and special authorization. This case shows that:

• Ambiguous authority boundaries
  : The job authority of the cashier was not effectively defined and restricted
• Lack of approval levels
  : No hierarchical approval or joint signature system was implemented for large fund disbursements
• Absence of accountability
  : There was no mechanism for timely detection and accountability of violations

Although Meiya Technology claimed in its prospectus that it had established systems such as account management and job separation, the fact that the cashier’s embezzlement of funds went undetected for a decade indicates that there are serious financial control defects within the company [1]. The specific manifestations are:

• Systems remain on paper
  : Internal control systems were not truly implemented
• Absence of implementation supervision
  : There was no effective inspection of the implementation of the systems
• Formalized operations
  : Fund management reduced to a formalistic process

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Meiya Technology is a typical family-owned enterprise, with actual controllers Wu Junxiong, Chen Lianjiang, Chen Peigang, and Cai Jiewen, who together hold 66.29% of the company’s voting rights [1][2]. Common governance issues of family-owned enterprises are reflected in this case:

• Weak awareness of internal control
  : The management did not attach sufficient importance to internal control
• Insider control
  : The finance department may be subject to the will of the management
• Lack of independence
  : Financial supervision is difficult to be independent from the actual controllers

Due to financing difficulties during the enterprise’s expansion period, Meiya Technology had situations where actual controllers and employees provided loan guarantees for the company, leading to frequent guarantee and fund transactions between the company and employees. Coupled with the lack of internal management, this created favorable conditions for fraudulent acts [1].

In addition to the cashier’s embezzlement of funds, Meiya Technology also has other internal control flaws:

• Fraud in R&D Working Hours
  : R&D working hours were recorded as “not counted based on actual attendance” from 2021 to 2023 [4]
• Cross-Period Revenue Recognition
  : “Delayed recognition after reconciliation” was adopted for some tourism revenue [4]
• Irregular Operation of the Three Meetings
  : Legal person shareholders failed to issue power of attorney in all previous general shareholders’ meetings [4]

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Job Separation Requirements	Specific Measures
Separation of Cashier and Accountant	The cashier shall not concurrently hold positions such as auditor, accounting file custodian, or recorder of accounts related to income, expenditure, expenses, and creditor’s rights and debts
Separation of Fund Operation and Approval	Large fund disbursements must be approved by both the finance director and general manager via dual signatures
Separation of Account Management and Use	Establish a full-time account administrator responsible for the approval and registration of account opening, change, and cancellation

• Real-time Monitoring Layer
  : Deploy a fund monitoring system to implement real-time early warning for large fund flows
• Regular Reconciliation Layer
  : Establish a three-level daily, weekly, and monthly reconciliation mechanism to ensure consistency between accounts and actuals
• Special Audit Layer
  : Conduct special fund audits every quarter, focusing on the inspection of abnormal transactions
• External Supervision Layer
  : Regularly engage external audit institutions to conduct internal control audits

Enterprises should clarify the authority scope, approval procedures, and corresponding responsibilities of each position for handling businesses and matters in accordance with the provisions of routine authorization and special authorization. For major businesses and matters, a collective decision-making approval or joint signature system should be implemented, and no individual may make decisions alone or arbitrarily change collective decisions [3].

In response to the Alipay account management loopholes exposed in this case, the following suggestions are put forward:

• The company’s electronic payment accounts must be opened in the company’s name; holding accounts in personal names on behalf of the company is prohibited
• Account changes must be approved at three levels: finance director, general manager, and board of directors
• Export account transaction records daily and conduct two-way reconciliation with financial accounts
• Implement physical isolation of electronic payment devices; operating company accounts on personal devices is prohibited

• Set up anonymous reporting channels to encourage employees to report violations
• Clarify the legal liabilities and limitation periods for fraudulent acts
• Establish a corporate culture of “zero tolerance” for fraudulent acts
• Regularly conduct anti-fraud training and warning education

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The embezzlement of funds by Meiya Technology’s cashier is a typical case of financial fraud caused by the lack of internal control, with the following warning implications:

1. Internal control construction is a long-term task
   : Enterprises should not only be satisfied with establishing systems, but also ensure the implementation of systems is put into practice
2. Supervision and inspection are indispensable
   : An effective internal control supervision mechanism is a key barrier to preventing fraud
3. Family-owned enterprises need more standardized governance
   : Concentrated equity does not equal standardized management; family-owned enterprises should attach greater importance to internal control construction
4. New risks need to be addressed in the digital era
   : New business models such as electronic payments and virtual accounts bring new internal control challenges

After enterprises have a clear understanding of the positioning and functions of internal control and anti-fraud systems, they need to implement them in all aspects of daily operation and management. The internal control and anti-fraud design of enterprise business processes should adhere to the implementation of incompatible job separation control and authorization and approval control [3].

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[1] Meiya Technology’s IPO Was Suspended Three Times; Cashier Embezzled 19 Million Yuan from the Company Over a Decade Without Being Discovered - Sina Finance

[2] Meiya Technology’s IPO Was Suspended Three Times; Cashier Embezzled 19 Million Yuan from the Company Over a Decade Without Being Discovered - Sohu

[3] Guide to Avoiding Pitfalls in Enterprise Anti-Fraud Investigations and Internal Control Design - Meiya Yian

[4] Meiya Technology: Fraud in R&D Working Hours and Cross-Period Revenue Recognition, Actual Controllers Burdened by Debt - CNfol.com