"Sie kennen" is the formal "you" conjugation, but as quis_lib_duo said above, "they know my dog" should also be accepted here. A capitalized "Sie" is an indicator of the formal "you," since it would not be capitalized for "they." However, here "Sie" is at the beginning of the sentence, making it ambiguous since "Sie" would need to be capitalized in either scenario.
The verb 'kennen' requires us to use the accusative case, and just like in English, that the pronoun 'he' changes its case and becomes 'him' in the sentence: "They know him", in German, nouns change their article (in this case a possessive article) from 'mein' to 'meinen'.
In this case (Akkusativ) only the male nouns change.