BT 2014 Annual Report Download - page 87

84 Governance
as well as their areas of particular audit focus as described in the
Independent Auditors’ Report on pages 118 to 120.
Group accounting policies, critical accounting estimates
and judgements
We reviewed the accounting policies, including a paper from
management and the disclosures in note 2 to the consolidated nancial
statements that relate to critical accounting estimates and judgements,
and re-conrmed they remained appropriate for the group. This included
a review of the accounting policies in respect of revenue and programme
rights recognition for BT Sport. We also considered the basis on which
the recoverability of the group’s investment in BT Sport is assessed.
Going concern
We considered management’s forecasts of group cash ows and net
debt as well as the nancing facilities available to the group. Following
this review and a discussion of the sensitivities, we conrmed that
it continues to be appropriate to follow the going concern basis of
accounting in the nancial statements.
Goodwill impairment
We reviewed management’s process and methodology for assessing the
carrying value of goodwill. This included consideration of the impact of
the segmental reporting changes following the simplication of internal
trading and the split of BT Retail into BT Business and BT Consumer (see
note 1 to the nancial statements). We also considered the resulting
revisions to cash generating units (CGUs) and cash ow forecasts for
BT Global Services, BT Business and BT Consumer. We considered the
key assumptions, resulting headroom and the sensitivities applied by
management in forming its assessment that no goodwill impairment
charges were required. We agreed with management’s assessment that
there was no impairment of goodwill this year. We also discussed and
agreed with management’s disclosures in respect of the headroom in BT
Global Services in note 12 to the nancial statements.
BT Pension Scheme (BTPS)
We reviewed the assumptions underlying the valuation of the pension
liabilities in the nancial statements and considered the nancial
assumptions including the discount rate, future ination, salary
increase expectations and pension increases as summarised in note 19
to the nancial statements. We also considered sensitivities around
the assumptions and reviewed the accounting impacts, as well as the
impact of the assumptions on the 2013/14 and 2014/15 income
statements and the related disclosures. We were satised that these
were appropriate.
Revenue, including major contracts
In addition to our review of the appropriateness of accounting policies,
management provided regular updates on the performance of major
contracts within BT Global Services. This included an overview of the
trading and operational performance of the contracts, the assessment
of the recoverability of dedicated contract assets, the assessment of
the future performance of the contracts and any requirement for loss
provisions. We agreed with management’s assessment that no additional
provision for loss or impairment of assets was required this year.
Asset veriƬcation and asset lives
We considered the results of management’s annual review of asset lives,
verication of assets and fully depreciated assets. We considered the
judgements taken in relation to asset lives and the methodology applied
to consider asset verication. We were satised that the proposed
adjustments were appropriate.
Other matters
Each quarter, as part of our review of the quarterly results, we are
provided with a summary of specic items and management’s view of
the quality of earnings and of the eective tax rate. At the half-year
and full-year, a detailed assessment of provisions is also provided and
discussed. We considered whether specic items are appropriately
categorised. In each quarter and for the full year, the committee was
satised with the information, analysis and explanations provided
in relation to the results. We reviewed management’s paper on the
revisions to presentation of other operating income and the trading
results of the lines of business (see note 1 to the nancial statements).
We also reviewed the restatements required under IAS 19 Employee
Benets’ (Revised 2011) prior to the publication of these in June 2013,
and considered the group’s bad debt provisioning policy, focusing on
particular areas where management had undertaken detailed reviews.
External audit
We
• considered and approved the auditors’ group audit plan – this
followed discussion with the auditors on the scope of the work to be
undertaken as well as their consideration of risk informing their plan
• requested that the audits of smaller operations in Brail and Singapore
and Plusnet plc (a UK subsidiary) be accelerated to the group’s year-
end reporting timetable
• reviewed reports on internal and external audit ndings
• considered the independence of the auditors and their eectiveness
taking account of responses from a questionnaire targeted at specic
stakeholders as well as our own assessment – we concluded they were
independent and recommended they be re-appointed by the Board and
• considered and approved the letter of representation issued to the
external auditors.
The committee and the external auditors have discussed the issues
addressed by the committee during the year and the areas of particular
audit focus, as described in the Independent Auditors’ Report on
pages118 to 120.
We discussed these areas of focus with them when they presented their
audit plan and again at the time of their review of the half-year results
and at the conclusion of their audit of the nancial statements for the
year. As they concluded their audit, they explained
• the work they had done to test management’s assumptions and
estimates, in particular in relation to the identied areas of audit focus
set out above
• they had reviewed the appropriateness and application of the group’s
accounting policies and
• the results of their testing of the controls and other procedures carried
out in the relevant overseas locations and any other issues they had
found there.
Management reported to the committee that it was not aware of any
material misstatement and the auditors also reported the misstatements
they had found in the course of their work. The committee conrmed
that these unadjusted misstatements were not material to the nancial
statements.
Auditor eƪectiveness
We discussed the quality of the audit throughout the year and consider
the performance of our external auditors, PricewaterhouseCoopers,
annually, taking into account feedback from a survey targeted at various
stakeholders across the business and the committee’s own assessment.
The evaluation focuses on audit scope and planning performance
of the lead audit partner and the audit team audit reporting and
communications added value and the audit fee. The external auditors’
performance was rated as meeting or exceeding expectations and,
overall, the relationship between management and the external auditors
is viewed as constructive with robust challenge by the auditors on areas
which require management judgement. The committee did feel that we
would benet from more detailed industry and benchmarking insight
and we asked the external auditors to provide us with these.
Audit tender
PricewaterhouseCoopers and its predecessor rms have been BT’s
auditors since BT listed on the London Stock Exchange in 1984.
The external auditors are required to rotate the lead partner every
ve years and other partners that are responsible for the group and
subsidiary audits must change at least every seven years. Such changes
are carefully planned to ensure business continuity without undue risk or
ineciency. The partner responsible for BT’s audit is completing his fth