Bowers Holdings plc has recently acquired a controlling interest in Shaldon Engineering plc, which produces high-quality machine tools for the European market. Following this acquisition, the internal audit department of Bowers Holdings plc examined the financial management systems of the newly acquired company and produced a report that was critical of its investment appraisal procedures.
The report summary stated:
Overall, investment appraisal procedures in Shaldon Engineering plc are very weak. Evaluation of capital projects is not undertaken in a systematic manner and post-decision controls relating to capital projects are virtually non-existent.
Required
Prepare a report for the directors of Shaldon Engineering plc, stating what you consider to be the major characteristics of a system for evaluating, monitoring and controlling capital expenditure projects.
(Certified Diploma)
What procedures should a business adopt for approving and reviewing large capital expenditure projects?