Analysis of Earthwear financial statement audit Essay

Analysis of Earthwear financial statement audit - Essay Example The entities major liabilities are accounts payable and liabilities which accrue. The entity has no potential parties who are related to it. Other uses its credit to be able to meet all the normal financing duties. The company accounting financial condition and position is stable and good. There are no individual significant events and any transactions such as those of acquisitions or selling off subsidiaries entities or product line during the financial year. The entity does not have any key contingencies and uncertainties. The firm's business is seasonal and most of the company sales and profits are normally realized during each fourth of the quarter. The regulation in the environment does not expose the firm to any risk neither does the legal and political environment and social factors. Earthwears closest competitors include Patagonia Timberland and Eddie. The firm has enough suppliers hence no single supply can affect the operations of the company. What interests customers alway s keeps on changing hence the firm needs to stay competitive and respond to the demands that keeps on changing like responding to changes in technology. The entity makes use of the accounting principles. No one single individual or individuals is allowed to dominate management and decisions. Decision making is well guided by the organizational structure. ... The management is always responsive to all the recommendations from the auditor. Company policies regarding matters like acceptable business activities conflicts of all interests and conduct are established effectively. Management provides a code of ethics which guide what is right and wrong all dealings with customers are based on principle of honesty. All controls are documented by the management the company maintains an informal job description as well as formal containing the roles of each job. grwdThe management always determines the required skills and expertise needed for each role. And makes sure to proof this with evidence from employees. The management is only motivated to maximize the wealth f the shareholders and not to engage in any activities that may be fraudulent. The management shows and communicates all information regarding internal control and in the process of financial reporting non-financial management do not have excessive participation in the selection of the accounting principles or in the determination of estimates. Financial ratio analysis for Earth wears clothiers. Short-term liquidity ratios The liquidity ratios indicate the liquidity position of a company. They measure the ability of a company to meet its current liabilities as they fall due. Current ratios measure current assets against current liabilities this ratio must be 2:1 in the normal situation. But this ratio may be different for different firms. Other clothiers have a current ratio of 2.17 in 2012 unedited higher than the previous years this shows that either there was a misstatement which occurred because of overstating of revenues or