Three Different Numbers for Trade Payable Account at Victory Electronics Venezuela: Reliability of Financial Statement Information

The case illustrates what internal control problems a foreign sales subsidiary of a multinational electronics manufacturer has faced and how the new manager has solved the issues. The purchase and treasury departments showed significant data discrepancies due to missing documents, and consequently inventory and cost of goods sold calculations were not reliable. Fluctuating foreign currency rates made internal control process more difficult. For example, accounting, purchase, payment departments reported different balances for the same trade payable account. The new manager, teamed up with consultants, sorted out the issues, implemented new system, and regenerated financial information of the subsidiary.