Compelling accounts are accounts that attract the attention of financial analysts because accounting professionals can easily manipulate them to meet personal interests. Accounts payable is one of the most compelling accounts that financial analysts should scrutinize to ensure that amounts recorded in the books accounts reflect the exact amount owed to suppliers. Besides, the inventory account is another compelling account that can easily be manipulated; thus, financial analysts should closely monitor them (Hale et al., 2020). Inventories account records many particulars, such as lose assets which can easily be mismanaged. Therefore, financial analysts and auditors should examine these accounts critically to ascertain that all company's items categorized under inventories are correctly reported in books of accounts.
Suppliers’ relationship is another compelling relationship that financial analysts should critically review to ensure that they are genuine business-related (Hale et al., 2020). Suppliers' relationships can be considered sensitive because accounting professionals can collude with them to manipulate accounts payable to fulfill personal interests.
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Ratios Used to Understand Compelling Accounts .
The account payable turnover ratio measures how a company makes payments to settle money owed to key stakeholders such as suppliers and creditors. Financial analysts should use this ratio to ascertain whether all transactions were correctly recorded in the initial books of accounts. The inventory turnover ratio measures the rate at which a business disposes, sells or uses its stock to generate income (Hale et al., 2020). This ratio enables financial analysts and auditors to examine the relationship between costs of goods sold and the average inventory for a given period. Financial analysts and auditors should use accounts payable turnover and inventory turnover ratios of the year under assessment to affirm that all transactions made by the company are recorded.
References
Hale, J., Legun, K., & Campbell, H. (2020). Accounting for account-abilities: Examining the relationships between farm nutrient measurement and collaborative water governance dynamics in Canterbury, New Zealand. Journal of Rural Studies .
