You are an audit manager in Tiphany & Co, a firm of Chartered Certified Accountants. You have recently been assigned to the audit of Clown Co for the year ended 30 September 20X8. Clown Co is an unlisted company and has been an audit client of your firm for a number of years. Clown 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 companys products to both domestic households and small to medium-sized businesses. Around 75% of Clown Cos sales transactions are cash-based and each of the companys sales staff prepares a cash sales report on a monthly basis. According to Clown Cos chief executive, Simon Becket, 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 companys products to friends and family. Mr Becket 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 companys 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 Becket 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 Tiphany & Co performed the taxation computation for Clown Co and completed the tax returns for both the company and Mr Becket personally. All of the taxation services have been invoiced to Clown Co as part of the total fee for the audit and professional services. Mr Beckets 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 Beckets name which identified the property transactions. During your initial meeting with Mr Beckets, he informed you that Clown Co is planning to develop a new website in order to offer online sales to its customers. He has asked Tiphany & 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 clients premises, you have learned that the audit team was invited to and subsequently attended Clown Cos 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 Abdoul, 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) Evaluate whether there are any indicators of money laundering activities by either Clown Co or its staff. (10 marks) (b) Comment on the ethical and professional issues arising from your review of the audit working papers and recommend any actions which should now be taken by Tiphany & Co. (15 marks)