Auditing final project.docx - Running head MILESTONE FOUR FINAL PROJECT SUBMISSION 1 Milestone 1 Our firm Willis Adams has been approached by EarthWear

Auditing final project.docx - Running head MILESTONE FOUR...

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Running head; MILESTONE FOUR: FINAL PROJECT SUBMISSION 1 Milestone 1 Our firm Willis & Adams, has been approached by EarthWear Clothiers to perform an audit for the period ending December 31, 2016. Willis & Adams have performed the audit for this client since 1975. At this time, we have conducted an evaluation of the EWC in order to determine whether or not it would be appropriate to retain EarthWear Clothiers as a client. EWC Corporate Structure: EarthWear Clothiers was founded by chairman of the board James Williams and president/CEO Calvin Rogers in 1973. EarthWear was incorporated in Idaho in 1975, and went public in 1986 as a Delaware Corporation (EWC, 2015, pg.2). EWC manufactures and sells outdoor sports, casual clothing, accessories, shoes and soft luggage. Their primary market is the United States, and other markets include Canada, Europe, and Japan (EWC, 2015, pg.12). EWC has relatively steady leadership within the corporation. All executive officers have maintained their position for 20+ years. While maintaining their long-term leadership, EWC also is led by members with experience from close competitors such as Eddie Bauer and Mountain Goat Sports (EWC, 2015, pg. 5). It is noted that as of November 2016 Carol McKay has been promoted to chief accounting officer/controller. She previously worked as a vice president of external reporting. It is questionable if her experience and skill set makes her capable of the new position (McGraw-Hill, 2017). Based off findings in their 2015 annual report, EWC continues to grow by increasing sales through improved product offerings, mailings of special issues, and pursuing additional opportunities to expand internationally (EWC, 2015, pg.3). EarthWear Clothiers appears to be in a relatively good financial position. Their accounts appear to remain stable from prior years,
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MILESTONE FOUR: FINAL PROJECT SUBMISSION 2 Inventory turnover days has been relatively the same. However, days of inventory on hand for 2015 is 81.6. This is larger than the industry average and indicates EWC could be keeping too much on hand. They are a very seasonal business in terms of profits. Majority of sales are made in the fourth quarter. Management believes this caused the decrease in net income of 27.8% while increasing revenue by 10.8%. Since 2014 the current ratio has dropped from 1.92 to 1.80, this could be from the $14,077 increase in accounts payable. Revenues for 2016 were $1.02 billion, assets totaled $261.7 million, and liabilities totaled $120.6 million. EWC is listed and traded on NASDAQ with the symbol of EWCC. The closing price as of December 31, 2015 is $26.75 and the number of shareholders of company stock is about 2,120 (EWC, 2015, pg.6). Willis & Adams Independence: Auditing standards state in PCAOB AS 1005.01 “ In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or auditors.” (PCAOB, 2002). Willis & Adams, CPA has performed audits for EWC for year ending December 31, 2015, of which states Willis & Adams performed the audit in accordance to the standards of Public Accounting Oversight Board. There are no events or circumstances that have become present in this past year that would impair our independence to the client EarthWear Clothiers.
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