In this mini$-$case you will complete the preliminary analytical procedures for the audit of EarthWear Clothiers, Incorporated.

INSTRUCTIONS:

Please download the file below to complete the audit tasks associated with this mini$-$case. The Excel workbook contains the instructions and workpapers you are to complete.

$12$e$\_$Ch$5\_$Mini$\_$case$\_$Analytics

Input your responses from Work Paper $5-2$ and $5-3$ into the corresponding questions in Connect.

Work Paper $5-2$

EARTHWEAR CLOTHIERS

Preliminary Analytical Procedures

Summary of Ratio Analyses & Assessment of Financial Condition

December $31,2022$

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 a 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 increase the extent of inventory$-$valuation testing and$/$or change the nature of the testing to address the increased risk.