Rendell Company is a company which had already involved in business almost 50 years and always produces profit. The company has seven operating divisions. Each division has general manager and Division Controller. The Division General Manager is responsible for reporting the division achievement to Corporate Controller. Division Controller has obligation to make report to Division General Manager regarding budget and performance reports. Corporate Controller jobs encompass financial accounting, internal auditing and budget analysis.
The relationship between Division Controller and Division General Manager is solid line. It means that all of the report Division Controller made should be supervised and approved by the Division General Manager before it is submitted to the Corporate Controller. This command line make the Division Controller should be loyal to Division General Manager. Then the problem appears. The Corporate Controller feels that the report from divisional general manager is bias and misleading. Some important information is being hid from report. As a result Corporate Controller feels difficult to analyze the report and make suggestion to corporate top management. Corporate Controller might think to change the reporting procedure to eliminate this negative side from current condition. The Rendell Company could adapt Martex system that the divisional controller report directly to Corporate Controller. This system successfully proven can be applied in Martex. However the Corporate Controller still not sure whether staying in recent system or move to Martex system is the best way.
As explained in the case that in Martex, the divisional controller is reported directly to the Corporate Controller in order to provide transparency related to budget issue. However, this system provides advantages and disadvantages. The advantages are first, the system will decrease asymmetric information between...