The wolf cloak is a woven magical object that transforms the wearer into a (comparatively) larger, wolf-like form. This one was commissioned by Mistress Verena herself, but many similar items exist, most are used as costumes for high-end bands of Players.

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Transcript:

P1-3: Abby and Erry play with the wolf cloak, Abby transforming into her own miniature wolf monster form to Erry's delight as Hulvin and Wivia interrogate Mistress Verena "But why have you been stealing our sheep? You're rich! What would you need our sheep for?" 

P4: "It wasn't about the sheep," Mistress Verena glares. "Then why?" ask Wivia 

P5: "Why have you been doing this?" Hulvin adds 

P6: "This land of course," Mistress Verena explains ask Wivia and Hulvin stare down at her and the Jobblins conspire in the background, "This could be so much more than farmland. I wouldn't have had to do this if you'd taken my offer like your neighbors had." 

P7: "And I would have gotten away with it if it weren't for those meddling-" Abby, clad in the wolf cloak, waves her claws in Mistress Verena's face, flinching away she scolds, "Stopit!"