Your comparison of the gross margin percent for James Drugs for the years 2013 through 2016 indicates a significant decline. This is shown by the following information

The following additional information is obtained from independent sources and the client's records as a means of investigating the controller's explanations

2015 $ 2016 15,150 9,832 $ 13,850 8,864 $ 2014 12,400 7,886 $ 2013 11,200 7,101 Sales (thousands) CGS (thousands) Gross margin Percent $ 5,318 $ $ $ 4,986 36.0 4,514 36.4 4,099 36.6 35.1 A discussion with Mackenzie Amrock, the controller, brings to light two possible explanations. She informs you that the industry gross profit percent in the retail drug industry declined fairly steadily for three years, which accounts for part of the decline. A second factor was the declining percent of the total volume resulting from the pharmacy part of the business. The pharmacy sales represent the most profitable portion of the business, yet the competition from discount drugstores prevents it from expanding as fast as the nondrug items such as magazines, candy, and many other items sold. Amrock feels strongly that these two factors are the cause of the decline. James Drugs ($ in thousands) Industry Gross Profit Percent for Retailers of Drugs and Related Products 32.6 2016 2015 2014 Drug Sales 6,121 6,046 5,766 5,488 Nondrug Sales $ 9,029 7,804 6,634 5,712 Drug Cost of Goods Sold $ 3,520 3,362 3,223 3,062 Nondrug Cost of Goods Sold $ 6,194 5,354 4,558 3,930 32.7 32.9 2013 33.3 Requirements a. Evaluate the explanation provided by Amrock. Show calculations to support your conclusions b. Which specific aspects of the client's financial statements require intensive investigation in this audit? Requirement a Evaluate the explanation provided by Amrock. Show calculations to support your conclusions. First, compute the gross margin percentage for drug sales for 2016 through 2013, then, compute the gross margin percentage for nondrug sales for 2016 through 2013 (Round your answers to the nearest tenth percent, XXX%) Drugs Nondrugs 2016 2015 2014 2013 % % For drugs, the percent The explanation given by Amrock is The percent for drugs had The gross margin percentage for nondrugs before 2016. The change in the grass margin percent for drug in 2016 could be due to the fact that Requirement b. Which specific aspects of the client's financial statements require intensive investigation in this audit? As the auditor, you accopt Amrock explanation if the decline is material. The decline in gross margin could be due to could be due to Further investigation