Catalyzes the initial step in the conversion of aurachin C to aurachin B. Catalyzes the epoxidation of the C(2)-C(3) double bond of aurachin C, which is followed by a semipinacol rearrangement, causing migration of the farnesyl group from C(3) to C(4). Accepts both NADH and NADPH, but has a preference for NADH. aurachin C + H(+) + NADPH + O2 = 4-hydroxy-2-methyl-3-oxo-[(2E,6E)-farnesyl]-3,4-dihydroquinoline 1-oxide + H2O + NADP(+) aurachin C + H(+) + NADH + O2 = 4-hydroxy-2-methyl-3-oxo-[(2E,6E)-farnesyl]-3,4-dihydroquinoline 1-oxide + H2O + NAD(+) Mutant accumulates aurachin D and aurachin C and does not produce aurachin B and aurachin A.