Reference no: EM133612138

Problem

Kosmas is a high-quality, private motor manufacturing company. It has recently joined a consortium for the purchase of parts. Kosmas 's purchases and capital expenditure systems are not integrated. Purchase orders are generated automatically by the computerised inventory system when inventory levels fall below a given level in the context of scheduled production. This system does not work well because the system uses outdated purchasing and production patterns and many manual adjustments are required. The orders are reviewed by the production controller and her junior managers and changes are made informally by junior clerical staff in the production controller's department. Some of the purchases are input into the buying consortium system which shows the optimum supplier for any combination of cost, delivery time and specification. This system has only been in operation for a few months. The system takes up a substantial amount of disk space on the company's computers and is suspected of causing problems in other systems. It is difficult to use and so far, only two of the production controller's junior managers are able to use it. As a result, the parts ordered through the system are sometimes of the incorrect specification or are delivered late. The remaining purchases are ordered directly from manufacturers, as before, through a reasonably well controlled buying department.

Task

Question A. Describe errors and misappropriations that may occur if purchases and capital expenditures are not controlled.

Question B. Explain the weaknesses relating to the purchases and capital expenditures systems of Kosmas