A Mutual Fund Company (the Company) has engaged your firm to conduct their internal audit services. All of the employees of the company are skilled investment managers and administrators. They are also very well paid compared to others in the industry.

Upon reviewing the documents you found out that the CEO of the Company had formed a company which offered similar business products and services but had been fined by the Securities Commission for failure to file its statutory returns in a timely manner. You have also found out, from your search on the internet, that a company with a similar name is listed under the fraud watch-list of the Commission.

As time is of the essence, you have contacted the HR Department of the company requesting a resume of the CEO. They advised that they could not locate it and that he was on vacation at that time. If have also attempted to google the name of this persons but you cannot locate him

You also realize that the company did not file their audited financials from 2018. So you contacted the previous accounting firm who were not available to provide any feedback on the client company and the reasons why the accounts were not submitted to the regulator. You complete your review by cross checking the picture of the office with On a final attempt to confirm the information, you cross check the picture of the offices provided with the google maps and find out that there is another structure on that location and it is not the Fund Company

1. What are the red flags identified which might indicate money laundering activity and/or terrorist financing in this case?

b. What are the risks and the potential threats that the accounting firm may be faced with in this situation?

c. What KYC/Due Diligence work could the accounting firm have carried out and when?