You are a government controller. A division manager being audited objects to the transfer price he is being charged by the audit group for the audit services. The managerobserves, "If I have to pay for theseservices, I should be allowed to buy them from an outside supplier who is prepared to offer them to me at a lowerprice." You have been asked to mediate this dispute. What would youdo?

A.

The key is that when the outside supplier isused, the company can free up its inside audit team and utilize them for higherprofit-based activities. Assuch, in order to improve the overall profitability of thecompany, the outside supplier should be used.

B.

Ascontroller, you are not in a position to mediate this dispute. The issue should be passed along to the chief financial officer.

C.

The key is that the services must be comparable. Not only must cost comparisons bemade, but also quality and service comparisons must be made. If the outside suppliermeets, orexceeds, the potential of the insider supplier and there are no securityissues, then the outsider supplier should be used.

D.

The key is that when the inside supplier isused, thecompany, in theend, will save money versus utilizing an outside supplier. Assuch, in order to improve the overall profitability of thecompany, the inside supplier should be used.