Name:

Class:

EARTHWEAR CLOTHIERS 3-5

Client Continuance Evaluation RDR
31 December 2014 Sept. 3, 2018
General Risk Indicators

Instructions: Evaluate and answer the following unanswered

questions regarding the risk of retaining EarthWear as an audit
client. Click on the yellow boxes and select either "Yes" or "No" If you selected 'Yes' on any of the questions to the left, provide and
from the drop down menu. explanation below:

Are there any concerns about undue reliance being placed on the results No
of our work? (i.e. sale of the company, financing)

Does the client have any associated entities that are not audited or are No
being audited by firms outside of Willis & Adams?
Have any situations been noted that bear on the integrity of management?
Yes
Is there evidence that the business is financially distressed? No
As a result of the Background check: In 1999, EarthWear's vice president of
finance, Don Evans, was charged with a misdemeanor involving illegal gambling
on local college sports games. Charges were later dropped in return for Mr.
Evans agreeing to pay a fine of €750 and perform 50 hours of community
service.

Is the client imposing on us any unreasonable scope or timing restrictions? No

Is the client's industry or business characterized by significant operating,

economic, product, of other commercial risk? (Examples of such risks
include: development or start-up stage, high risk industry, an industry with No
relatively short product lives, or product(s) of unknown or doubtful
commercial feasibility.)

Are there any pending enforcement matters or other investigations the

outcome of which could adversely impact the viability or reputation of the No
business?

Has the information gathering process raised concerns about: unusual or

contentious accounting policies, auditing procedures, internal controls, No
reporting, proper accounting records, tax or regulatory matters?

Are there any external conditions or trends that may have a significant
impact on the client, such as changes in buyers, changes in suppliers, or No
new competitors?

Are there any internal conditions or trends that may raise concern, such as Former Controller Brad Norton left Earthwear in 2014 and went to another
Yes
management turnover or new accounting information systems? clothing company and also oversaw the new accounting software in early 2013.

Are there any other risk concerns arising out of the information gathering Carol Mckay was the VP of external reporting before being promoted to
process? Yes Controller. The management are concern if Carol McKay's skills are enough to be
able to do the Job of a Controller.

Briefly explain your overall risk assessment of the client:

There are some doubts and uncertainties that results from the background check
Overall risk assessment of the client: Medium
of Don Evans and the promotion of Carol McKay.

Based on the information gathered, and the above evaluation of Retain

engagement continuation risk, recommend whether or not to have
Willis & Adams continue to provide service to this client. Click on
the yellow box and select either "Retain" or "Dismiss" from the drop
down menu.