ANSWER THE FOLLOWING :

YES OR NO

IF YES THAN Briefly explain WHY

A. Have any situations been noted that bear on the integrity of management?

B. Is there evidence that the business is financially distressed?

C. Are there any internal conditions or trends that may raise concern, such as management turnover or new accounting information systems?

D. Are there any other risk concerns arising out of the information gathering process?

E Overall risk assessment of the client

F. Based on the information gathered, and the above evaluation of engagement continuation risk, recommend whether or not to have Willis and Adams continue to provide service to this client.

Nature of Business: EarthWear produces high-quality clothing for outdoor sports, such as hiking, skiing, fly-fishing, and whitewater kayaking. Over the years, the company's product lines have grown to include casual clothing, accessories, shoes, and soft luggage. EarthWear offers its products through three retailing options: catalogs, retail outlets, and its website. EARTHWEAR CLOTHIERS Client Continuance Evaluation December 31, 2016 \begin{tabular}{|c|} \hline 32 \\ \hline SAA \\ \hline 1/3/2017 \\ \hline \end{tabular} Other Characteristics Sub-prime lending operations: Select type of operation: A division of a regulated financial institution \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} A commercial entity that sells all loans it originates \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} A commercial entity that retains all or a portion of the loans it originates \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Select all that are applicable: Company plans to go public or raise significant equity? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Does the company intend to go public using a "back-door" registration? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Contingent fee arrangement? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Insured depository or institution? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Is the institution subject to a cease and desist order? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Has the institution entered into a memorandum of understanding with a regulatory agency? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Insurance company (life, property, and casualty)? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Public entity and local government risk pools? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Government securities dealers? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Internet companies engaged in morally questionable activities? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Unregulated casinos? \begin{tabular}{|c|} \hline No \\ \hline \end{tabular} Entty that is an agency or subdivision of the rederal government, entity receiving substantial Federal funding or grants, or one subject to the Single Audit Act (excluding local governmental entities)? No Ma B1 KI engagement since she joined the firm in 2000 and became manager last year. kground Investigation Overview The Firm requires background investigations for all clients. Subjects of the background investigations include the clients and key decision makers. Key decision makers are normally the company's board and audit committee (if applicable) chairs, chief executive officer, chief financial officer and principal accounting officer, but should also include significant principal investors, shareholders or others who exercise significant influence over company operations. Significant company related entities and/or subsidiaries should also be considered as Summarize the results of the investigation below: In 1999, EarthWear's vice president of finance, Don Evans, was charged with a misdemeanor involving illegal gambling on local college basketball games. Charges were later dropped in return for Mr. Evans agreeing to pay a fine of $750 and perform 50 hours of community service. No other illegal or ethical problems were found with any other EarthWear executive. EARTHWEAR CLOTHIERS ". . . . EARTHWEAR CLOTHIERS Consolidated Statements of Operations EARTHWEAR CLOTHIERS Consolidated Statements of Cash Flows In thaionndnl Industry Source: Dun \& Bradstreet (D\&B). The median values of the industry ratios are used for comparison purposes. For ratios not specifically included on D\&B, ratios were calculated from average financial statement data provided. N/A = not available or could not be calculated from financial data. (5) McGraw-Hill Education, 2016