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 This system does not work well because the system uses outdated purchasing and production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.

Required:

$3\mathrm{.}1.$ Describe errors and misappropriations that may occur if purchases and capital expenditures are not

controlled

$(5$ marks$)$

$3\mathrm{.}2.$ Explain the weaknesses relating to the purchases and capital expenditures systems of Kosmas $(15$ marks$)$