ACCA Strategic Professional · Advanced Audit and Assurance (International) · Money laundering

Kestrel & Co's audit team suspects that a client's large cash sales may be proceeds of drug dealing. The firm's MLRO decides not to submit a report to the authorities and the team continues the audit as normal, believing the amounts are immaterial to the financial statements. Which statement best describes the firm's position?

The decision is not appropriate. Reporting duties arise from knowledge or suspicion of criminal property, not from proof or financial statement materiality, so the MLRO should assess and normally report. Failing to report suspicion can itself be an offence, and public interest entity status is irrelevant.

1. AThe decision is acceptable because money laundering reporting duties depend on materiality to the financial statements
2. BThe decision is acceptable because auditors have no reporting duty unless they have proof of a crime
3. CThe decision is not appropriate because suspicion of criminal property generally requires reporting regardless of materiality, and failure to report may be an offenceCorrect
4. DThe decision is not appropriate only if the client is a public interest entity