Corporate Structure and Annual Report Evaluation
EarthWear Clothiers’ (EWC) structure and the 2015 report are adequate and meet the auditing firm’s basic requirements. EWC’s corporate structure is that of a public limited company, and it manufactures and distributes high-quality clothing for sports activities (McGraw-Hill Higher Education [MHHE], n.d.a). In the mid-1980s, EWC transformed into a corporation under the Delaware General Corporation Law, and its current structure, consisting of a six-member executive team, possesses stability and features adequate responsibility distribution (MHHE, n.d.a; EWC, 2015). Williams and Rogers, the original leaders, fulfill the central executive functions, whereas DeSantiago supervises EWC’s (2015) daily operations. EWC’s (2015) other executives assume responsibility for sales and financial operations, and the corporate structure supports the provision of financial data and relevant records to Willis & Adams (W&A). EWC’s (2015) annual report demonstrates appropriate data transparency, which is evident from the presence of shareholder statements, comprehensive financial data, adherence to internal control policies, and accounting policy summaries. EWC’s (2015) report, according to W&A, demonstrates adherence to international frameworks, such as the Internal Control-Integrated framework. Thus, both structure and the report can be assessed positively.
External Auditing Firm Assessment
If evaluated objectively, W&A features both independence and a deep understanding of the chief client’s industry. Concerning independence, the W&A team is explicitly stated to be non-related to EWC strategically and in terms of policies (EWC, 2015; MHHE, n.d.b). In the auditor report, W&A emphasizes following the Public Company Accounting Oversight Board’s standards, including the auditing agency’s independence and impartiality (MHHE, n.d.a). W&A’s comprehension of the sportswear industry is also profound, which stems from forty years of auditing EWC and W&A’s well-documented understanding of the client’s environment and ethical values, including everyday dealings’ integrity and the industry’s codes of conduct (MHHE, n.d.b). The contact’s longevity and the absence of ethics complaints from EWC against W&A imply the latter’s adequate industry-specific knowledge.
In terms of staffing capabilities, W&A’s three-member team is comprised of qualified staff capable of meeting EWC’s expectations. Willis is active in the Idaho chamber of commerce, and Adams holds membership in certified public accountants’ organizations at the national level and in Idaho; the professionals’ prior experiences with EWC and ethical excellence emphasize their readiness to serve EWC in the future (MHHE, n.d.b). Mitchell has vast experience with public businesses and is qualified to handle the technology-related part of auditing and technical issues (MHHE, n.d.b). Thus, W&A’s staffing capabilities can be assessed positively, given the team’s adequate industry knowledge and qualifications.
Internal/External Factors and Accepting the Client’s Audit Request
For W&A, accepting the audit request from EWC would be appropriate due to the client’s overall predictability. Regarding external factors that should inform W&A’s final decision, the client firm’s corporate structure does not reveal deviations from personal integrity principles; for instance, most of EWC’s (2015) executive employees have been working for the organization since the 1990s, and no accountability-related concerns have been reported. To continue on external factors, prior auditing activities have indicated surmountable issues, for instance, the risks of changes to policy compliance resulting from “changes in conditions” (EWC, 2015, p. 15). Nevertheless, after a long period of collaboration, EWC is still a well-known environment for W&A, which could make unpredictability less pronounced. For internal factors, from the analysis above, W&A’s degree of independence and the presence of technical abilities to proceed with auditing, including the team’s preparedness, are conducive to accepting EWC as a client. Therefore, accepting the request from EWC would be an appropriate line of action for W&A.
References
EarthWear Clothiers. (2015). Annual report: EarthWear 2015. Author. Web.
McGraw-Hill Higher Education. (n.d.a). Welcome to EarthWear Clothiers. Web.
McGraw-Hill Higher Education. (n.d.b). Willis & Adams, CPAs. Web.