You are an audit manager in Thomasson & Co, a firm of Chartered Certified Accountants. You have recently been assigned to the audit of Clean Co for the year ended 30 September 20X8. Clean Co is an unlisted company and has been an audit client of your firm for a number of years.

Clean Co is a national distributor of cleaning products. The company buys the cleaning products from wholesalers and employs a team of approximately 750 sales staff around the country who sell the company’s products to both domestic households and small to medium-sized businesses. Around 75% of Clean Co’s sales transactions are cash-based and each of the company’s sales staff prepares a cash sales report on a monthly basis. According to Clean Co’s chief executive, Simon Blackers, and in order to foster ‘an entrepreneurial spirit’ amongst his staff, each staff member (including the senior management team) is encouraged to make cash sales and is paid on a commission basis to sell the company’s products to friends and family. Mr Blackers leads the way with this scheme and recently sold cleaning products with a value of $33,000 to a business associate of his. He has transferred these funds directly into an off-shore bank account in the company’s name on which he is the sole signatory.

Review of audit working papers
Your review of the audit working papers and an initial meeting with Mr Blackers have identified the following potential issues:

Following your review of the audit engagement letter and the working papers of the taxation section of the audit file, you have established that Thomasson & Co performed the taxation computation for Clean Co and completed the tax returns for both the company and Mr Blackers personally. All of the taxation services have been invoiced to Clean Co as part of the total fee for the audit and professional services. Mr Blackers’ personal tax return includes a significant number of transactions involving the purchase and sale of properties in various international locations. The taxation working
papers include a detailed review of a number of off-shore bank accounts in Mr Blackers’ name which identified the property transactions.

During your initial meeting with Mr Blackers, he informed you that Clean Co is planning to develop a new website in order to offer online sales to its customers. He has asked Thomasson & Co to provide assistance with the design and implementation of the website and online sales system.

As a result of your audit review visit at the client’s premises, you have learned that the audit team was invited to and subsequently attended Clean Co’s annual office party. The client provided each member of the audit team with a free voucher worth $30 which could be redeemed at the venue during the party. The audit senior, Paula Metcalfe, who has worked on the audit for the last three years has informed you that the audit team has always been encouraged to attend the party in order to develop good client relations.

Required:
(a) (i) Discuss the policies and procedures which Thomasson & Co should have in place in relation to an anti‑money laundering programme; and (4 marks)

(ii) Evaluate whether there are any indicators of money laundering activities by either Clean Co or its staff. (6 marks)