You are responsible for the audit of the tangible non-current assets of Megatron Ltd, a company engaged in the manufacture and supply of soft drinks and other beverages to the retail, catering and leisure industries. The accountant has provided you with the following schedule summarizing the movements in tangible non-current assets during the year ended 31 October 2022.

From your discussions with the finance director, you ascertain that a capital expenditure budget is prepared annually. Departmental managers can authorize capital expenditure up to £5,000 as long as it is within their budget. Board approval is required for amounts above this threshold but the CEO, who is also the major shareholder in the company, does not always adhere to this policy. He often commits the company to acquiring assets without considering how they are to be financed, leaving the finance director to arrange the borrowings. Capital expenditure proposal forms are required to be completed but this is not always done, particularly when items are required in an emergency, and there is no formal policy in respect of obtaining quotes for major items of expenditure. There is a tangible non-current asset register which is reconciled to the Nominal Ledger on a monthly basis. No other checking procedures involving the non-current asset register are undertaken. In July 2022, the company commenced the construction of a new packing line. The line is due to be completed in January 2023. Costs recorded in the tangible non-current asset register include materials, own and sub-contract labour, and overheads.

Required:
Identify weaknesses in the system described and, for each weakness, explain the consequences that could result from it.

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Cost At 1 November 2021 Additions Disposals At 31 October 2022 Freehold land and buildings £000 3,733 384 4,117 Plant and equipment £000 7,282 1,412 (144) 8,550 Asset in course of construction £000 2,040 2,040 Total £000 11,015 3,836 (144) 14,707