EarthWear Clothiers: Report on Client Engagement

Global or multinational companies appoint external auditing teams to review their financial disclosures and statements. The external auditing team requires to have sufficient knowledge of the client’s industry to understand its opportunities and threats in the market. Another main requirement is that the staff of the external auditing team should be capable of conducting the audit independently. All these essential elements relate to client engagement which is the initial requirement to conduct an audit of a firm. The current report summarizes the critical elements of client engagement in the context of auditing a public limited company, EarthWear Clothiers.

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Corporate Structure and Annual Report

The decision to move forward with the client’s request for audit depends on various factors which significantly affect the corporate world. The initial step is to evaluate the corporate structure of a firm that sends a request for an audit. EarthWear Clothiers was incorporated in 1975 and started its business by providing high-quality products at reasonable prices (EarthWear Clothiers, 2015). The corporate structure of EarthWear Clothiers is similar to that of a public limited company that manufactures and sells its products through physical outlets and superstores. It has two trademarks of “EarthWear” and “EWC,” which are used for labeling its catalogs and products.

The chief executives of EarthWear Clothiers are James G. Williams, Calvin J. Rogers, Dominique DeSantiago, Linda S. McDaniel, James C. (“JC”) Watts, and Mary Ellen Tornesello. The company is listed on NASDAQ, and its share price is regularly traded and updated on the stock exchange. The most important fact is that it is a valuable client of Willis and Adams since 1975. In other words, Willis and Adams have been auditing this company for the last 44 years and it fully understands its business and people who are working in its management (EarthWear Clothiers, 2015). The information indicates that the audit firm has sufficient knowledge of its operations. Furthermore, EarthWear Clothiers trusts Willis and Adams to audit its financial statements.

The letter of shareholders in the annual report of EarthWear Clothiers shows that they provide access to all financial data and records to Willis and Adams during the audit process (EarthWear Clothiers, 2015). The element of cooperation is also important in client engagement. Although an independent auditor should act as an inspector, the requirement of corporate data or information requires engagement with the client. Therefore, it can be said that the corporate structure and annual reporting of EarthWear Clothiers comply with the requirements of Willis and Adams.

The details of various transactions of the company are also provided in its annual report. Willis and Adams would have recommended changes to EarthWear Clothiers to ensure transparency and accountability. The details of the company’s executives at the beginning of the annual report also highlight that Willis and Adams brought improvement in the disclosures of EarthWear Clothiers (EarthWear Clothiers, 2015). Furthermore, it is easy for Willis and Adams to match and track records with the details kept by the management of the company.

Independence, Knowledge, and Staffing Capabilities

The most relevant element of the decision to audit a particular firm is to check whether the staff of an external auditing team is independent or not. Willis and Adams have been working for many years and have developed a strong reputation in the global market (Willis and Adams, 2019). Although it is a small size firm with few clients, including EarthWear Clothiers, it is well-known for assuring independence and transparency in the auditing process. The term ‘independent means that the team is free from external pressures and behaves rationally and ethically (Knapp, 2017).

The repetition of a particular task or series of actions increases the knowledge of an individual or a team. The auditing team of Willis and Adams has been providing audit services to EarthWear Clothiers for more than four decades (EarthWear Clothiers, 2015). The longevity of the client-audit firm relationship indicates that the firm has complete knowledge of the EarthWear Clothiers industry. Furthermore, it has adequate knowledge of market conditions and can suggest EarthWear Clothiers how it can improve its earnings, reporting, and long-term sustainability.

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The capability of the audit staff is also the main requirement of the auditing process. The professional auditing team should conduct the audit to ensure transparency and reliability in the report (Brunelli, 2018). The staff of Willis and Adams is highly qualified and experienced in auditing, and it has sufficient knowledge to deal with critical situations (Willis and Adams, 2019). Furthermore, the staff is fully aware of the technicalities, possibilities, and issues of EarthWear Clothiers, and it can give recommendations for improving the company’s reporting mechanism.

The findings of the internal audit are also important for an independent auditor to identify the strengths and weaknesses of the company (Knapp, 2016). It is evident from the annual report of EarthWear Clothiers that the auditor’s statement also assures effective internal controls over financial reporting and disclosure by the company. It is declared at the end of the report by Willis and Adams that the company’s management has a clear understanding of various risks. The auditing team also shares relevant information with its client to ensure efficient client engagement and recommends changes according to the external business environment.

Rational Decision Making

The task of auditing is not new, and the team of independent auditors has experience working with the company. The requirement is to prepare a plan by including the strengths of last year’s audit and addressing mistakes or errors. Perfection with improvement is the priority in the audit procedure, and firms ensure that the same mistakes are not repeated that could affect their reputation in the world (Brunelli, 2018). The client has a high value for Willis and Adams due to their long-term relationship. Therefore, it is recommended to accept the request without any additional requirements.

In this case, the significant element is to ensure that there will be no leverage, favoritism, or biased working in the upcoming audit (Knechel & Salterio, 2016). Although Willis and Adams is a responsible organization that has a team of audit experts, there is a need for special attention when dealing with valuable clients. The communication strategies and methods of investigation may differ from previous audits. However, it is essential to improve the entire audit process. The elements of productivity and efficiency are also important to ensure that the firm completes the audit within a specific period without any problems.

Willis and Adams also guide and assists EarthWear Clothiers to prepare its financial statements according to the requirements of accounting laws and regulations. EarthWear Clothiers would have improved its financial statements in the previous years to make them compliant with accounting and auditing regulations. Therefore, it is a viable decision to accept the request of EarthWear Clothiers, which is also necessary for the long-term profitability and sustainability of the audit firm.


Brunelli, S. (2018). Audit reporting for going-concern uncertainty: Global trends and the case study of Italy. New York, NY: Springer.

EarthWear Clothiers. (2015). EarthWear annual report, 2015. Web.

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Knapp, M. C. (2017). Contemporary auditing (11th ed.). Mason, OH: Cengage Learning.

Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk (4th ed.). New York, NY: Taylor & Francis.

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