You learned in Chapter 1, Chapter 5 and subsequent chapters that many of the accounts of a company are related, and changes should occur in the same direction. For exam¬ ple, a decrease in capital assets is not usually compatible with an increase in amortization expense as a percent of capital assets.

You have applied low assurance analytical procedures to accounts in the inventory and warehousing cycle with the following results:

• Inventory has increased.

• Gross margin has increased.

Required Assuming that you have decided that there are possible misstatements in the accounts mentioned in the bullets, indicate what may have caused the contradictory results.

For example, the increase in amortization expense as a percent of capital assets referred to above could have been caused by amortization expense being taken or assets that had been disposed of.