this mon case you will complete the preliminary analytical procedures for the 2016 audit of EarthWear Clothiers, CARTEAR CLOTHES One S WAS WER LOVE Yon VER SORE St CEFERO MED WE WE bu 34 300 ST 21 SCS 2 Les SKE 2105 2 VER ME BO . 223 SI ITEN 704 1970 . 3 SON 50 3100 ILOR SK O WENS 1144 10 SO . WOD VISS LE ma 1997 OK RO SKE -41 , D21 03 054 DOON be 101 HUS SH TE NIE SOOS . Nu 120 -210 VEL 100 Na 16.115 20 BO ved GOS 31 ws WED 11 17 . wat 2 VEE WORE 2 VE an 200 SA - arhalder om ook 90 WOOD 1500 2001 15400 tes SH 118 VICE ND VICES WS GOT 000 34 son 40 ES comprome GRAZIE WED WS WO SP SA V MEM VND SWEET www ADRE RE M SOME 3390 741 00 10 DON SON CE . NE EARTH EAR CLOTHERS Commons Operations LE TE 2010 Dutca SPS Salam Dar 180 2014 Dora SMS 172735 06.14 1000W DO WS 10000 San RE HER 30 30 no Sex 10 WE SP ingen andere tragende on from open encome stie . 2733 513 672 VER 2003 23 000 MO ON un w 1122 3 16 . 10 400 OS 00 0 VO NE DO 4 MED 2.3 12 10000 170 19. 16 SIN WE WE MI NEZ 2.154 . 2 21 21 13 WEET om 2 LAR TE 10 10 waringer and caringen 150 114 138 1 Sp 995 19:15 13,00 dening EARTH EAR CLOSERS Care De 100 Des 430 4 2010 105 0 TN For the de 2018 D So Act Dale TON 10 TOON SAS 4 1040 122150 SIS ON 02 447.737 30 TON 16 1110 ODON SIN 477 DON 7.AT 2005 ON DMX sh 010 0 ON 1480 019 11 Obes 0004 to) DI 000 TE ta ON 23 CBD 11.40 betet 183 IN 20,154 11.30 120 1 2 Basket 2 180 Did the 113 1 sa 156 154 TS 135 79531 HI HI V Huahands 15.74 9 14 "Content that incontrato 2014 2015 the expenditur 2016 TAT 0.00% 4.0 10 0.00% AN ON 33 3 - OBOS ZI - 000 00 ODON os . MD 5 11 OLUN 2 2015 30 Review the ratio analyses contained on Work Paper 5-1. You can read the Advanced Module Selected Financial Ratios in Chapter 5 of the text for a description of these ratios. You will be asked to provide further analyses of these ratios as you complete Work Paper 5-2. Work Paper 5-1 EARTHWEAR CLOTHIERS 541 MA 10.2017 Ratio Antes December 31, 2016 December 31 2012 2013 2014 2015 2015 2015 Actual Mudited) patite padited put Expected piece fre Expected Indu DICE 2016 164 10 192 110 194 2.17 0.23 210 0.07 SHORT-TERM LIQUIDITY RATIOS: Current Ratio aumental currentes Barack Ratio quid current Operating Cash Ratio show from operations fourreres 0,39 044 022 0 OS 073 00 OTO -007 0.9 042 011 034 0.40 000 0 00 NA NA 7110 7725 7424 62 76.41 118.00 1260 NA NA 5.13 473 431 434 4.34 2.09 174 1410 -1101 ACTIVITY RATIOS Receivables Tumowe Det ene ending reces aps Outstanding in Accounts Receivable 3 day receitmover Tentory Tumor cort of /verkry aps of Inventary on Hand 36 od wtory 427 441 447 49 157 112 620 -2.33 106 41 1551 1140 1172 6922 $0.99 25 500 3629 ROFITABILITY PERFORMANCE RATIOS oss Prof Percentage grous profit 44.56% 44.91% 449 2519 12. 141 3830 61046 3.61% 3.64 227% 3.000 42676 124% 30% 98% 16.00% 6149 10.50 60% 40 11.17% 706 7 40% 3779 come tum on Assets rencome wum an Equity natcometowy 2800 12.06% 1622% 11.00% 5.147 16.70% 11.6% -0.00% or an To 4 6 10 GEN 4 11.17 10 1 18 2016 11 SOX 1260 samanth COVERERADOS 0 051 58 034 -0.01 NA D These Terred 2521 2441 101) 2012 Exportedly recrow 2012 2016 expected or 2016) trany Ban Dun) The mediante att det compone Forros dedon, on vaardid NIR Woodborn Award: 10.00 points Complete all the fields on Work Paper 5-2 indicated below. Additionally, EarthWear Common-Size Financial Statements have been included to aid you in your decisions. Work Paper 5-2 EARTHWEAR CLOTHIERS Preliminary Analytical Procedures Summary of Ratio Analyses & Assessment of Financial Condition December 31, 2016 1. Comments and Summary Based on your review of Work Paper 5-1, list one or two ratios in each of the following categories that you believe increase the risk of potential misstatement. Explain why you believe the risk is increased and identify possible causes of a potential misstatement and indicate if you believe the auditor would need to revise his or her typical audit approach to address the risk For example, "Days of Inventory on Hand" increased significantly indicating merchandise is held in inventory for longer period than prior years and it is also held for a longer period than the industry average. This increases the risk of obsolete inventory and/or the market value dropping below recorded cost. The auditor should ncrease the extent of inventory-valuation testing and/or change the nature of the testing to address the ncreased nisk SHORT-TERM LIQUIDITY RATIOS: ACTIVITY RATIOS: Doa meison Wors Paper Action Ear Wear Common Financial Simonave been included to you in your Work Paper 5-2 EARTHWEAR CLOTHIERS Preliminary Analytical Procedures Summary of Patio Analyses & Assessment of Financial Condition December 31, 2016 1. Comments and Summary Based on your review of Wok Paper 5-1. list one or two ratios in each of the following categories that you believe increase them or potential statement. Explain why you believe the risks increased and identity poble causes of a potentia mestiment and indicate it you believe the auditor would need to revise his or her typical aut approach to address them For example Days of inventory on Hand increased significantly indicating merchandise is held in inventory for a longer period than prior years and it is also held for a longer period than the industry average This increas the of eventory and the market value dropping below recorded cost. The auditor should increase me arter of inventory valuation testing and or change the nature of me testing to address the increased SHORT-TERM LIQUIDITY RATIOS: ACTIVITY RATIOS: PROFITABILITY / PERFORMANCE RATIOS: COVERAGE RATIOS: 2. Assessment of Financial Position Based on your review of Work Paper 5-1, assess the cent's ability to continue as a going concern (to stay in business) by responding to the folowing questions A Identity ratios and trends, if any, that cause concern about the client's ability to continue as a poing concer B. Identity ratios and trends, Wany, that indicate a highlikelihood that the client will continue successfully as a going concom Assess the dents financial condition as one of the following COVERAGE RATOS 2. Assessment of Financial Position Based on your review of Work Paper 1 assess the client's ability to continue as a going concem (to stay in business by responding to the following questions A ldentity ratios and trends, if any, that cause concern about the client's ability to continue as a going concem Identity ratios and trends, if any, that indicato a high likelihood that the client will continue successfully as a going contem C. Assess the client's financial condition as one of the following (Click to select) D. Briefly explain the reasoning behind your assessment References Worksheet Learning Objective: 05- Learning Colective 05-09 Leam the purpose 04 Know the and types of antical procedures procedures used for obtaining audit evidence Difficulty: 2 Medium Learning Objective:05. Learning Objective: 05-10 Botim with OB Develop an tical to that we useful as analytical understanding of the procedures content types organization and ownership of de documentation this mon case you will complete the preliminary analytical procedures for the 2016 audit of EarthWear Clothiers, CARTEAR CLOTHES One S WAS WER LOVE Yon VER SORE St CEFERO MED WE WE bu 34 300 ST 21 SCS 2 Les SKE 2105 2 VER ME BO . 223 SI ITEN 704 1970 . 3 SON 50 3100 ILOR SK O WENS 1144 10 SO . WOD VISS LE ma 1997 OK RO SKE -41 , D21 03 054 DOON be 101 HUS SH TE NIE SOOS . Nu 120 -210 VEL 100 Na 16.115 20 BO ved GOS 31 ws WED 11 17 . wat 2 VEE WORE 2 VE an 200 SA - arhalder om ook 90 WOOD 1500 2001 15400 tes SH 118 VICE ND VICES WS GOT 000 34 son 40 ES comprome GRAZIE WED WS WO SP SA V MEM VND SWEET www ADRE RE M SOME 3390 741 00 10 DON SON CE . NE EARTH EAR CLOTHERS Commons Operations LE TE 2010 Dutca SPS Salam Dar 180 2014 Dora SMS 172735 06.14 1000W DO WS 10000 San RE HER 30 30 no Sex 10 WE SP ingen andere tragende on from open encome stie . 2733 513 672 VER 2003 23 000 MO ON un w 1122 3 16 . 10 400 OS 00 0 VO NE DO 4 MED 2.3 12 10000 170 19. 16 SIN WE WE MI NEZ 2.154 . 2 21 21 13 WEET om 2 LAR TE 10 10 waringer and caringen 150 114 138 1 Sp 995 19:15 13,00 dening EARTH EAR CLOSERS Care De 100 Des 430 4 2010 105 0 TN For the de 2018 D So Act Dale TON 10 TOON SAS 4 1040 122150 SIS ON 02 447.737 30 TON 16 1110 ODON SIN 477 DON 7.AT 2005 ON DMX sh 010 0 ON 1480 019 11 Obes 0004 to) DI 000 TE ta ON 23 CBD 11.40 betet 183 IN 20,154 11.30 120 1 2 Basket 2 180 Did the 113 1 sa 156 154 TS 135 79531 HI HI V Huahands 15.74 9 14 "Content that incontrato 2014 2015 the expenditur 2016 TAT 0.00% 4.0 10 0.00% AN ON 33 3 - OBOS ZI - 000 00 ODON os . MD 5 11 OLUN 2 2015 30 Review the ratio analyses contained on Work Paper 5-1. You can read the Advanced Module Selected Financial Ratios in Chapter 5 of the text for a description of these ratios. You will be asked to provide further analyses of these ratios as you complete Work Paper 5-2. Work Paper 5-1 EARTHWEAR CLOTHIERS 541 MA 10.2017 Ratio Antes December 31, 2016 December 31 2012 2013 2014 2015 2015 2015 Actual Mudited) patite padited put Expected piece fre Expected Indu DICE 2016 164 10 192 110 194 2.17 0.23 210 0.07 SHORT-TERM LIQUIDITY RATIOS: Current Ratio aumental currentes Barack Ratio quid current Operating Cash Ratio show from operations fourreres 0,39 044 022 0 OS 073 00 OTO -007 0.9 042 011 034 0.40 000 0 00 NA NA 7110 7725 7424 62 76.41 118.00 1260 NA NA 5.13 473 431 434 4.34 2.09 174 1410 -1101 ACTIVITY RATIOS Receivables Tumowe Det ene ending reces aps Outstanding in Accounts Receivable 3 day receitmover Tentory Tumor cort of /verkry aps of Inventary on Hand 36 od wtory 427 441 447 49 157 112 620 -2.33 106 41 1551 1140 1172 6922 $0.99 25 500 3629 ROFITABILITY PERFORMANCE RATIOS oss Prof Percentage grous profit 44.56% 44.91% 449 2519 12. 141 3830 61046 3.61% 3.64 227% 3.000 42676 124% 30% 98% 16.00% 6149 10.50 60% 40 11.17% 706 7 40% 3779 come tum on Assets rencome wum an Equity natcometowy 2800 12.06% 1622% 11.00% 5.147 16.70% 11.6% -0.00% or an To 4 6 10 GEN 4 11.17 10 1 18 2016 11 SOX 1260 samanth COVERERADOS 0 051 58 034 -0.01 NA D These Terred 2521 2441 101) 2012 Exportedly recrow 2012 2016 expected or 2016) trany Ban Dun) The mediante att det compone Forros dedon, on vaardid NIR Woodborn Award: 10.00 points Complete all the fields on Work Paper 5-2 indicated below. Additionally, EarthWear Common-Size Financial Statements have been included to aid you in your decisions. Work Paper 5-2 EARTHWEAR CLOTHIERS Preliminary Analytical Procedures Summary of Ratio Analyses & Assessment of Financial Condition December 31, 2016 1. Comments and Summary Based on your review of Work Paper 5-1, list one or two ratios in each of the following categories that you believe increase the risk of potential misstatement. Explain why you believe the risk is increased and identify possible causes of a potential misstatement and indicate if you believe the auditor would need to revise his or her typical audit approach to address the risk For example, "Days of Inventory on Hand" increased significantly indicating merchandise is held in inventory for longer period than prior years and it is also held for a longer period than the industry average. This increases the risk of obsolete inventory and/or the market value dropping below recorded cost. The auditor should ncrease the extent of inventory-valuation testing and/or change the nature of the testing to address the ncreased nisk SHORT-TERM LIQUIDITY RATIOS: ACTIVITY RATIOS: Doa meison Wors Paper Action Ear Wear Common Financial Simonave been included to you in your Work Paper 5-2 EARTHWEAR CLOTHIERS Preliminary Analytical Procedures Summary of Patio Analyses & Assessment of Financial Condition December 31, 2016 1. Comments and Summary Based on your review of Wok Paper 5-1. list one or two ratios in each of the following categories that you believe increase them or potential statement. Explain why you believe the risks increased and identity poble causes of a potentia mestiment and indicate it you believe the auditor would need to revise his or her typical aut approach to address them For example Days of inventory on Hand increased significantly indicating merchandise is held in inventory for a longer period than prior years and it is also held for a longer period than the industry average This increas the of eventory and the market value dropping below recorded cost. The auditor should increase me arter of inventory valuation testing and or change the nature of me testing to address the increased SHORT-TERM LIQUIDITY RATIOS: ACTIVITY RATIOS: PROFITABILITY / PERFORMANCE RATIOS: COVERAGE RATIOS: 2. Assessment of Financial Position Based on your review of Work Paper 5-1, assess the cent's ability to continue as a going concern (to stay in business) by responding to the folowing questions A Identity ratios and trends, if any, that cause concern about the client's ability to continue as a poing concer B. Identity ratios and trends, Wany, that indicate a highlikelihood that the client will continue successfully as a going concom Assess the dents financial condition as one of the following COVERAGE RATOS 2. Assessment of Financial Position Based on your review of Work Paper 1 assess the client's ability to continue as a going concem (to stay in business by responding to the following questions A ldentity ratios and trends, if any, that cause concern about the client's ability to continue as a going concem Identity ratios and trends, if any, that indicato a high likelihood that the client will continue successfully as a going contem C. Assess the client's financial condition as one of the following (Click to select) D. Briefly explain the reasoning behind your assessment References Worksheet Learning Objective: 05- Learning Colective 05-09 Leam the purpose 04 Know the and types of antical procedures procedures used for obtaining audit evidence Difficulty: 2 Medium Learning Objective:05. Learning Objective: 05-10 Botim with OB Develop an tical to that we useful as analytical understanding of the procedures content types organization and ownership of de documentation