EarthWear Hands-on Mini-case

Chapter 4 - Understanding the Entity and Its Environment

The McGraw-Hill Companies, Inc, !"#!
INSTRUCTIONS:
1
2
Hint: Refer to the Company History/Background page and Consolidated Financial Statements on the EarthWear Website
$ields yo% are to complete on the &%estionnaire are colored yellow The color will disappear as the 'ield is completed
3
In this mini-case yo% will complete the &%estionnaire 'or %nderstanding Earth(ear Clothiers, Inc and the
environment in which it operates
The wor)sheet titled *+%estionnaire* contains a partially completed copy o' the &%estionnaire ,can
thro%gh the &%estions and responses that have already -een completed
.o% are to complete &%estions #, !, /, 0, 1, #2, #1, #3, and 4" 4e'er to the in'ormation on the Earth(ear
Investor and (illis 5 6dams C76s we-sites 8wwwmhhecom9messier:e; and the -ac)gro%nd doc%ment
-elow to complete the &%estions .o% can also leverage the wor) o' the prior year a%dit team shown in
E<hi-it 4-/ o' yo%r te<t
7rint a copy o' the *7rint =%t* wor)sheet to s%-mit in class %nless otherwise indicated -y yo%r instr%ctor
The *7rint =%t* wor)sheet is 'ormatted so only those &%estions yo% have completed will print and not the
entire &%estionnaire 8'ormatted to 'it on one sheet;
A Qestionnaire !or "oc#entin$ the Understandin$ o!
EarthWear C%othiers and its En&iron#ent
C%ient Na#e: EarthWear C%othiers Co#'%eted (): Enter Your Name Here
Entit) and En&iron#ent Cate$or): Natre o! the Entit) Re&ie*ed ():
+ear ended: "ece#(er 31, 2-12 "ate: #"9!19!"#4
Qestion
Ris. /actors "escri'tion0Res'onse An) Re#ainin$ Ris.
1
No1
2
(ho are the entity>s )ey c%stomers? No1
3
(ho are the entity>s )ey s%ppliers?
2
(hat is the entity>s organi@ational str%ct%re? Ao
3
(here are its maBor locations?
4
(hat are the entity>s maBor assets? In&entor) and 5ro'ert), '%ant, and e6i'#ent1 No1
7
(hat are the entity>s maBor lia-ilities? No1
8
Ao
9 6re there any potential related parties? Ao Ao
1-
Ao Ao
11 Coes the entity have any maBor %ncertainties or contingencies? Ao Ao
12
Co general economic conditions present any ris)s 'or the entity?
13 Coes the reg%latory environment present any ris)s 'or the entity? Ao Ao
12
Coes the legal9political environment present any ris)s 'or the entity? Ao Ao
13
14
Co s%pplier dynamics present any ris)s 'or the entity? Ao
(hat are the entity>s maBor so%rces o' reven%e, incl%ding the nat%re
o' its prod%cts and9or services?
Hi$h-6a%it) c%othin$ !or otdoor s'orts, sch as hi.in$, s.iin$, !%)-
!ishin$, and *hite-*ater .a)a.in$1 O&er the )ears, the Co#'an):s
'rodct %ines ha&e $ro*n to inc%de casa% c%othin$, accessories,
shoes and so!t %$$a$e1
The co#'an) has a #ai%in$ %ist *hich consists o! a''ro;i#ate%) 2111
'eo'%e1 Ho*e&er, a''ro;i#ate%) 7 #i%%ion are &ie*ed as csto#ers
(ecase the) #ade at %east one 'rchase !ro# the co#'an) *ithin the
%ast 22 #onths1 Additiona%%), a sr&e) condcted () the Co#'an) in the
United States drin$ 2-1- indicated that a''ro;i#ate%) 3-< o! its
csto#ers *ere in the 33-32 a$e $ro' and had #edian inco#es o!
=78,---1
A%% $oods are 'rodced () inde'endent #an!actrers e;ce't !or #ost
o! its so!t %$$a$e, *hich is asse#(%ed at the Co#'an):s !aci%ities1
"rin$ 2-11, the Co#'an) 'rchased #erchandise !ro# a''ro;i#ate%)
3-- do#estic and !orei$n #an!actrers1 One #an!actrer and one
inter#ediar) acconted !or a(ot 12-29< o! the Co#'an):s recei&ed
#erchandise, res'ecti&e%), in 2-111 In 2-11 a(ot 8-< o! the Co#'an):s
#erchandise *as i#'orted, #ain%) !ro# Asia, Centra% A#erica, and
Me;ico1
+es, the co#'an) *o%d (e s(>ect
to a n#(er o! ris.s1 /or e;a#'%e,
i! these !orei$n contries nder$o
econo#ic hardshi's or sto'
s''%)in$ to the Co#'an), the
Co#'an) *o%d need to !ind
a%ternati&e s''%iers1 Additiona%%),
*or.ers (oth do#estica%%) and
internationa%%) co%d nder$o a
stri.e, ths sto''in$ shi'#ent o!
s''%ies1 /rther#ore, the &a%e o!
!orei$n crrenc) co%d a''reciate
re%ati&e to the US "o%%ar, *hich
*o%d #a.e s''%ies #ore cost%)1
The company has a well-developed organi@ational str%ct%re with clear lines
o' a%thority among the vario%s operating departments and sta'' '%nctions
The organi@ational str%ct%re is appropriate 'or Earth(ear>s activities
Doise, Idaho is the main corporate location Earth(ear also has phone and
distri-%tion centers in the United Eingdom, Germany, and Fapan
Ao Aone o' these co%ntry locations
pose threats to Earth(ear as a res%lt
o' e<propriation or limits on
repatriation o' earnings
The co#'an) has no %on$ ter# de(t, (t the) do ha&e an nsecred
do#estic %ine o! credit sed to !inance 'rchases
(hat are the entity>s 'inancial characteristics incl%ding 'inancing
so%rces and c%rrent and prospective 'inancial condition?
The company %ses its line o' credit to meet its normal 'inancing activities
=verall the company>s 'inancial condition is good
6re there any individ%ally signi'icant events and transactions s%ch
as ac&%isitions or disposals o' s%-sidiaries, -%sinesses, or prod%ct
lines d%ring the year?
The company>s -%siness is highly seasonal Most o' the company>s sales
and pro'it are reali@ed d%ring the 'o%rth &%arter
Ao The company is aware o' the
importance o' 'o%rth &%arter sales
The company contin%es to re'ine its
catalog mailings, so &%arterly res%lts
may 'l%ct%ate
Coes the competitive ind%stry environment present any ris)s 'or the
entity? Identi'y any competitors
The Co#'an):s 'rinci'a% co#'etitors are retai% stores, inc%din$
s'ecia%t) sho's, de'art#ent stores, and other cata%o$ co#'anies1
"irect co#'etitors inc%de Eddie ?aer, @and:s End, @1@1 ?ean,
5ata$onia, and Ti#(er%and1 The a''are% retai% (siness in $enera% is
intense%) co#'etiti&e1
+es, the co#'an) #a) a%so !ace
increased co#'etition !ro# other
retai%ers as the n#(er o! te%e&ision
sho''in$ channe%s and the &ariet)
o! #erchandise o!!ered o&er the
internet increase1
Ao The company has an ade&%ate n%m-er o' s%ppliers Ao one s%pply can
signi'icantly a''ect the company>s operations
17
Co c%stomer dynamics present any ris)s 'or the entity? No1
18 Co social9environmental 'actors present any ris)s 'or the entity? Ao Ao
19
Co technological 'actors present any ris)s 'or the entity?
2-
Ao Ao
21
6re there any other e<ternal 'actors that present a ris) 'or the entity? Ao Ao
No, the co#'an) has a s!!icient n#(er o! 'eo'%e on their #ai%in$ %ist
A2111 #i%%ionB and a s!!icient n#(er o! csto#ers *ho ha&e #ade
'rchases in the %ast 22 #onths1
+es1 Tho$h the co#'an) s*itched to a ne* s)ste#, it !aced si$ni!icant
'ro(%e#s in the third and !orth 6arters o! 2-1-1 These 'ro(%e#s
co%d contine or arise a$ain1
No, 'ro(%e#s *ith the s)ste# *ere
%ar$er%) reso%&ed !or the #ost 'art
a!ter 2-1-1
Co acco%nting principles, incl%ding those that are ind%stry-speci'ic
and determined -y reg%latory a%thority present any ris)s 'or the
entity?
22
Ao Ao
23
6re -%siness ris)s ade&%ately monitored? Ao
22 Has management adopted so%nd acco%nting principles? .es Ao
23
.es Management cons%lts with %s a-o%t new acco%nting iss%es Ao
24
Ao
27
Coes management give high priority to internal control? Ao
28
.es Ao
29
Ao
3-
.es Ao
31
.es Ao
32
.es Ao
33
.es Ao
32
.es Ao
33
.es Ao
34
.es Ao
Mana$e#ent 'hi%oso'h) and o'eratin$ st)%e:
Co one or a 'ew individ%als dominate management and operating
decisions?
.es The company manages its -%siness ris)s thro%gh a -%siness plan and a
strong -%dgeting process ,enior management meet at least monthly to
disc%ss the -%dget and events that might a''ect the company The company
also has a ,trategic 4is) Management Committee that is responsi-le 'or
considering how '%t%re events 8eg, Internet sales; may a''ect the company
Coes management ade&%ately cons%lt with its a%ditor on
acco%nting iss%es?
Is management willing to adB%st the 'inancial statements 'or
misstatements that approach a material amo%nt?
.es Management are willing to -oo) misstatements that we identi'y d%ring
the a%dit
.es Management iss%es a Management>s 4eport on $inancial ,tatements
that incl%des a statement a-o%t the ade&%acy o' the company>s internal
control system
Has management esta-lished and maintained internal control that
will, among other things, initiate, record, process, and report
transactions consistent with management assertions in the 'inancial
statements?
Has management -een responsive to prior recommendations 'rom
its a%ditors?
Management has always -een responsive to o%r recommendations on
internal control
Inte$rit) and ethica% &a%es:
Have appropriate entity policies regarding s%ch matters as
accepta-le -%siness practices, con'licts o' interest, and codes o'
cond%ct -een esta-lished and are they ade&%ately comm%nicated?
Coes management demonstrate the appropriate Gtone at the top,H
incl%ding e<plicit moral g%idance a-o%t what is right or wrong?
6re everyday dealings with c%stomers, s%ppliers, employees, and
other parties -ased on honesty and 'airness?
Coes management doc%ment or investigate deviations 'rom
esta-lished controls?
Co##it#ent to co#'etence: Asee E;hi(it 4-1B
Coes the company maintain 'ormal or in'ormal Bo- descriptions or
other means o' de'ining tas)s that comprise partic%lar Bo-s?
Coes management determine to an ade&%ate e<tent the )nowledge
and s)ills needed to per'orm partic%lar Bo-s?
Coes evidence e<ist that employees have the re&%isite )nowledge
and s)ills to per'orm their Bo-?
37
Ao
38
Ao ,ee comments a-ove Ao
39
Ao Ao
2-
21
Ao Ao
22
Ao Ao
Mana$e#ent characteristics:
Is there a motivation 'or management to engage in 'ra%d%lent
'inancial reporting? ,peci'ic indicators might incl%deI
Ao (hile management is motivated to ma<imi@e shareholder wealth, they
are not motivated to engage in 'ra%d%lent 'inancial reporting
J 6 signi'icant portion o' management>s compensation
represented -y -on%ses, stoc) options, or other incentives,
the val%e o' which is contingent %pon the entity achieving
%nd%ly aggressive targets 'or operating res%lts, 'inancial
position, or cash 'low
J 6n e<cessive interest -y management in maintaining or
increasing the entity>s stoc) price or earnings trend thro%gh
the %se o' %n%s%ally aggressive acco%nting practices
J 6 practice -y management o' committing to analysts,
creditors, and other third parties to achieve what appear to -e
%nd%ly aggressive or clearly %nrealistic 'orecasts
J 6n interest -y management in p%rs%ing inappropriate
means to minimi@e reported earnings 'or ta<Kmotivated
reasons
Is there a 'ail%re -y management to display and comm%nicate an
appropriate attit%de regarding internal control and the 'inancial
reporting process? ,peci'ic indicators might incl%deI
J 6n ine''ective means o' comm%nicating and s%pporting
the entity>s val%es or ethics, or comm%nication o' inappropriate
val%es or ethics
J Comination o' management -y a single person or small
gro%p witho%t compensating controls s%ch as e''ective
oversight -y the -oard o' directors or a%dit committee
J Inade&%ate monitoring o' signi'icant controls
J Management 'ailing to correct )nown reporta-le
conditions on a timely -asis
J Management setting %nd%ly aggressive 'inancial targets
and e<pectations 'or operating personnel
J Management displaying a signi'icant disregard 'or
reg%latory a%thorities
J Management contin%ing to employ an ine''ective
acco%nting, in'ormation technology, or internal a%diting sta''
Co non'inancial management have e<cessive participation in, or
preocc%pation with, the selection o' acco%nting principles or the
determination o' signi'icant estimates?
Is there high t%rnover o' senior management, co%nsel, or -oard
mem-ers?
No1 Unti% /e(rar) 2-12, *hen EarthWear:s Chie! Accontin$ O!!icer,
?rad Norton ne;'ected%) %e!t the co#'an) to ta.e another >o(1
Ho*e&er, 'rior to that, the co#'an):s e;ecti&e tea# had (een the
sa#e !or 3 )ears1
+es1 There has (een #ch
s'ec%ation o! Caro% McCa):s
6a%i!ications () EarthWear
e;ecti&es1
6re there strained relationship -etween management and the
c%rrent or predecessor a%ditor? ,peci'ic indicators might incl%deI
J $re&%ent disp%tes with the c%rrent or predecessor
a%ditor on acco%nting, a%diting, or reporting matters
J Unreasona-le demands on the a%ditor incl%ding
%nreasona-le time constraints regarding the completion o' the
a%dit or the iss%ance o' the a%ditor s reports
J $ormal or in'ormal restrictions on the a%ditor that
inappropriately limit his or her access to people or in'ormation
or his or her a-ility to comm%nicate e''ectively with the -oard
o' directors or the a%dit committee
J Comineering management -ehavior in dealing with the
a%ditor, especially involving attempts to in'l%ence the scope o'
the a%ditor s wor)
Is there a )nown history o' sec%rities law violations or claims
against the entity or its senior management alleging 'ra%d or
violations o' sec%rities laws?
23
Ao
22
Ao
23
.es Ao
24
Ao
27
Ao
28
.es Ao
29
Is this evidenced -y Ao
3-
.es Ao
31
.es Ao
32
.es Ao
33
.es Ao
32
6re s%ch o-Bectives .es Ao
33
Coes the appropriate level o' management .es Ao
34
.es Ao
?oard o! directors and adit co##ittee:
Coes the -oard o' directors and its maBor committees contain an
appropriate n%m-er o' GindependentH directors?
.es The Doard o' Cirectors is composed o' 2 senior mem-ers o'
management and 4 independent -oard mem-ers
6re there reg%lar meetings o' the -oard o' directors 8or compara-le
-odies; to set policies and o-Bectives, review the entity>s
per'ormance, and ta)e appropriate action, and are min%tes o' s%ch
meetings prepared and signed on a timely -asis?
.es The Doard o' Cirectors meet &%arterly to review Earth(ear>s
per'ormance, or when events occ%r or transactions ta)e place that
signi'icantly a''ects the company
The Corporate ,ecretary prepares min%tes o' these meetings within one
wee) and the ,ecretary signs them a'ter approval o' the Doard
Coes the -oard o' directors ins%re that the overall operations o' the
entity ins%re that management>s o-Bectives are congr%ent with other
maBor sta)eholders 8eg, investors and creditors;?
Coes an a%dit committee e<ist? I' so, is the a%dit committee
composed o' GindependentH directors?
.es The a%dit committee is composed o' two directors o' the company who
are not mem-ers o' management
Coes the a%dit committee ade&%ately assist the -oard in
maintaining a direct line o' comm%nication with the entity>s e<ternal
and internal a%ditors?
.es The a%dit committee also meets with the internal and e<ternal a%ditors
each &%arter
Coes the a%dit committee have ade&%ate reso%rces and a%thority to
discharge its responsi-ilities?
The a%dit committee meets &%arterly B%st prior to the -oard o' directors
meeting and min%tes are maintained o' each meeting Doth mem-ers o' the
a%dit committee have s%-stantial 'inancial e<perience
J 4eg%lar meetings?
J The appointment o' &%ali'ied mem-ers?
J Min%tes o' the meetings?
Coes the entity set entity wide o-Bectives that state what the entity
desires to achieve, and are they s%pported -y strategic plans?
Coes the entity have a ris) analysis process that incl%des
estimating the signi'icance o' the ris)s, assessing the li)elihood o'
their occ%rring, and determining the actions needed to respond to
the ris)s?
Coes the entity have mechanisms to identi'y and react to changes
that may dramatically and pervasively a''ect the entity?
Coes management have clear o-Bectives in terms o' -%dget, pro'it,
and other 'inancial and operating goals?
J Clearly written?
J 6ctively comm%nicated thro%gho%t the entity?
J 6ctively monitored?
J 6de&%ately investigate variances?
J Ta)e appropriate and timely corrective actions?
Has management esta-lished proced%res to prevent %na%thori@ed
access to, or destr%ction o', doc%ments, records, assets, programs,
and data 'iles?
37
Ao
38
.es Ao
39 6re s%ch controls ade&%ately adhered to? .es Ao
4-
.es Ao
41
.es Ao
42
6re acco%nting and data processing centrali@ed or decentrali@ed? .es 6ll in'ormation technology is centrali@ed Ao
Assi$n#ent o! Athorit) and Res'onsi(i%it):
43
Ao
42
.es Ao
43
.es Ao
44
.es Ao
47 Is there ade&%ate doc%mentation o' data processing controls? .es Ao
Co##nications:
48
.es Ao
49
.es Ao
7-
Coes the entity have a per'ormance meas%rement system? Ao
71
Ao
72
.es Ao
73
.es Ao
72
.es Ao
73 How o'ten are per'ormance reports prepared? .es Ao
74
.es Ao
77
.es Ao
78 Coes the entity have an internal a%dit '%nction? .es Ao
79
.es Ao
Or$aniDationa% strctre:
Is the organi@ation o' the entity clearly de'ined in terms o' lines o'
a%thority and responsi-ility?
.es The company has clear lines o' a%thority among the vario%s operating
departments and sta'' '%nctions
6re controls 'or a%thori@ation o' transactions esta-lished at an
ade&%ately high level?
Is the organi@ational str%ct%re appropriate 'or the si@e and
comple<ity o' the entity?
Has management esta-lished policies 'or developing and modi'ying
acco%nting systems and control activities?
Is there clear assignment o' responsi-ility and delegation o'
a%thority to deal with s%ch matters as organi@ational goals and
o-Bectives, operating '%nctions, and reg%latory re&%irements?
.es The h%man reso%rces department maintains detailed Bo- descriptions,
incl%ding speci'ic d%ties and reporting responsi-ilities Management has
reviewed these Bo- descriptions 'or proper assignment and delegation o'
a%thority
6re employees> Bo- responsi-ilities, incl%ding speci'ic d%ties,
reporting relationships, and constraints, clearly esta-lished and
comm%nicated to employees?
Has management clearly comm%nicated the scope o' a%thority and
responsi-ility to data processing management?
Coes ade&%ate comp%ter systems doc%mentation indicate the
controls 'or a%thori@ing transactions and approving systems
changes?
Coes management comm%nicate employees> d%ties and control
responsi-ilities in an e''ective manner?
Coes comm%nication 'low across the organi@ation ade&%ately to
ena-le people to discharge their responsi-ilities e''ectively?
.es The company manages per'ormance thro%gh a -%siness plan and a
strong -%dgeting process ,enior management meet at least monthly to
disc%ss the -%dget and corporate per'ormance
I' so, what )ey per'ormance indicators 8E7Is; are %sed -y
management to meas%re per'ormance?
Inventory T%rnover, Gross 7ro'it 7ercentage, Cays o' Inventory on hand,
4et%rn on 6ssets, 4et%rn on E&%ity
Coes the entity -enchmar) its per'ormance against its ind%stry and
maBor competitors?
Coes the entity consider 'inancial analysts> research and earnings
reports?
Coes the in'ormation system give management the necessary
reports on the entity>s per'ormance relative to esta-lished
o-Bectives, incl%ding internal and e<ternal in'ormation?
Is the in'ormation provided to the right people in s%''icient detail and
in time to ena-le them to carry o%t their responsi-ilities?
6re comm%nication channels esta-lished 'or people to report
s%spected improprieties?
6re recommendations made -y the internal and e<ternal a%ditors
implemented?
Na#e:
C%ass:
A Qestionnaire !or "oc#entin$ the Understandin$ o!
EarthWear C%othiers and its En&iron#ent
C%ient Na#e: EarthWear C%othiers Co#'%eted ():
Entit) and En&iron#ent Cate$or): Natre o! the Entit) Re&ie*ed ():
+ear ended: "ece#(er 31, 2-12 "ate: #"9!19!"#4
Qestion
Ris. /actors "escri'tion0Res'onse An) Re#ainin$ Ris.
1
No1
2
(ho are the entity>s )ey c%stomers? No1
3
(ho are the entity>s )ey s%ppliers?
4
(hat are the entity>s maBor assets? In&entor) and 5ro'ert), '%ant, and e6i'#ent1 No1
7
(hat are the entity>s maBor lia-ilities? No1
13
17
Co c%stomer dynamics present any ris)s 'or the entity? No1
19
Co technological 'actors present any ris)s 'or the entity?
2-
Please Complete
(hat are the entity>s maBor so%rces o' reven%e, incl%ding the nat%re
o' its prod%cts and9or services?
Hi$h-6a%it) c%othin$ !or otdoor s'orts, sch as hi.in$, s.iin$, !%)-
!ishin$, and *hite-*ater .a)a.in$1 O&er the )ears, the Co#'an):s
'rodct %ines ha&e $ro*n to inc%de casa% c%othin$, accessories,
shoes and so!t %$$a$e1
The co#'an) has a #ai%in$ %ist *hich consists o! a''ro;i#ate%) 2111
'eo'%e1 Ho*e&er, a''ro;i#ate%) 7 #i%%ion are &ie*ed as csto#ers
(ecase the) #ade at %east one 'rchase !ro# the co#'an) *ithin the
%ast 22 #onths1 Additiona%%), a sr&e) condcted () the Co#'an) in the
United States drin$ 2-1- indicated that a''ro;i#ate%) 3-< o! its
csto#ers *ere in the 33-32 a$e $ro' and had #edian inco#es o!
=78,---1
A%% $oods are 'rodced () inde'endent #an!actrers e;ce't !or #ost
o! its so!t %$$a$e, *hich is asse#(%ed at the Co#'an):s !aci%ities1
"rin$ 2-11, the Co#'an) 'rchased #erchandise !ro# a''ro;i#ate%)
3-- do#estic and !orei$n #an!actrers1 One #an!actrer and one
inter#ediar) acconted !or a(ot 12-29< o! the Co#'an):s recei&ed
#erchandise, res'ecti&e%), in 2-111 In 2-11 a(ot 8-< o! the Co#'an):s
#erchandise *as i#'orted, #ain%) !ro# Asia, Centra% A#erica, and
Me;ico1
+es, the co#'an) *o%d (e s(>ect
to a n#(er o! ris.s1 /or e;a#'%e,
i! these !orei$n contries nder$o
econo#ic hardshi's or sto'
s''%)in$ to the Co#'an), the
Co#'an) *o%d need to !ind
a%ternati&e s''%iers1 Additiona%%),
*or.ers (oth do#estica%%) and
internationa%%) co%d nder$o a
stri.e, ths sto''in$ shi'#ent o!
s''%ies1 /rther#ore, the &a%e o!
!orei$n crrenc) co%d a''reciate
re%ati&e to the US "o%%ar, *hich
*o%d #a.e s''%ies #ore cost%)1
The co#'an) has no %on$ ter# de(t, (t the) do ha&e an nsecred
do#estic %ine o! credit sed to !inance 'rchases
Coes the competitive ind%stry environment present any ris)s 'or the
entity? Identi'y any competitors
The Co#'an):s 'rinci'a% co#'etitors are retai% stores, inc%din$
s'ecia%t) sho's, de'art#ent stores, and other cata%o$ co#'anies1
"irect co#'etitors inc%de Eddie ?aer, @and:s End, @1@1 ?ean,
5ata$onia, and Ti#(er%and1 The a''are% retai% (siness in $enera% is
intense%) co#'etiti&e1
+es, the co#'an) #a) a%so !ace
increased co#'etition !ro# other
retai%ers as the n#(er o! te%e&ision
sho''in$ channe%s and the &ariet)
o! #erchandise o!!ered o&er the
internet increase1
No, the co#'an) has a s!!icient n#(er o! 'eo'%e on their #ai%in$ %ist
A2111 #i%%ionB and a s!!icient n#(er o! csto#ers *ho ha&e #ade
'rchases in the %ast 22 #onths1
+es1 Tho$h the co#'an) s*itched to a ne* s)ste#, it !aced si$ni!icant
'ro(%e#s in the third and !orth 6arters o! 2-1-1 These 'ro(%e#s
co%d contine or arise a$ain1
No, 'ro(%e#s *ith the s)ste# *ere
%ar$er%) reso%&ed !or the #ost 'art
a!ter 2-1-1
Is there high t%rnover o' senior management, co%nsel, or -oard
mem-ers?
No1 Unti% /e(rar) 2-12, *hen EarthWear:s Chie! Accontin$ O!!icer,
?rad Norton ne;'ected%) %e!t the co#'an) to ta.e another >o(1
Ho*e&er, 'rior to that, the co#'an):s e;ecti&e tea# had (een the
sa#e !or 3 )ears1
+es1 There has (een #ch
s'ec%ation o! Caro% McCa):s
6a%i!ications () EarthWear
e;ecti&es1