ACCA Strategic Professional · Advanced Audit and Assurance (International) · Money laundering
During the audit of Kestrel Ltd, a junior auditor notices several large cash receipts from an unfamiliar overseas party with no apparent commercial purpose. She tells the audit senior she suspects money laundering. The senior replies that the audit team should first ask the finance director to explain the receipts and mention that the firm may report them. Which is the most appropriate view of the senior's proposed action?
The senior's plan is inappropriate. The suspicion should go to the firm's MLRO, and warning the finance director that a report may be made risks tipping off, which is an offence. Routine inquiries not revealing the suspicion may continue, but the possible report must not be disclosed.
- AAppropriate, because management must always be given the chance to explain before any report is made
- BInappropriate, because the suspicion should be reported to the firm's MLRO and discussing the possible report with the finance director risks tipping offCorrect
- CAppropriate, provided the audit working papers record the finance director's explanation
- DInappropriate, because the junior auditor should report directly to the police instead of the MLRO
Explanation
Once suspicion arises, it should be reported through the internal channel to the MLRO. Telling the finance director that a report may be made could amount to tipping off, which is itself an offence in typical regimes. Recording the explanation does not cure the risk, and the proper route is the MLRO rather than the police directly.
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