SEC Ltd, a small electrical accessories company, wants to design a company-wide computer purchasing system. To date the company has maintained a semi-manual record system for all its purchases.

For the previous three financial years the company has made average annual purchases of £34m (all purchases from UK suppliers) and average annual profits of approximately £10.6m. The company has approximately 350 employees working at six locations throughout the UK: Manchester, which is the company’s head office, Birmingham, Leeds, Swindon, Bristol and Newcastle.

You have recently completed an audit of activities within the purchasing department within SEC Ltd. The department employs 15 buyers, seven supervisors, a manager and clerical personnel. Your audit has disclosed the following conditions:

n The company has no formal rules on conflicts of interest. Your analysis produced evidence that one of the 15 buyers in the department owns a substantial interest in a major supplier and that he procures supplies averaging £150,000 a year from that supplier. The prices charged by the supplier are competitive.Required Explain:

n the purpose of each of the above requirements within a company such as HLU plc, and n the problems which could occur should the above requirements not be complied with.