Vodafone 2015 Annual Report Download - page 102

Area of focus How our audit addressed the area of focus
Provisions and contingent liabilities
There are a number of threatened and actual legal,
regulatory and tax cases against the Group. There is a
high level of judgement required in estimating the level
of provisioning required.
Refer to the Audit and Risk Committee Report, note
1 – Basis of preparation (Critical accounting judgements
and key sources of estimation uncertainty), note 17 –
Provisions and note 30 – Contingent liabilities.
In responding to this area of focus, our procedures included the following:
a testing key controls surrounding litigation, regulatory and tax procedures;
a where available, reading external legal opinions obtained by management;
a meeting with regional and local management and reading of subsequent
Group correspondence;
a discussing open matters with the Group litigation, regulatory, general counsel and
tax teams;
a assessing and challenging management’s conclusions through understanding
precedents set in similar cases; and
a circularising where appropriate of relevant third party legal representatives and direct
discussion with them regarding certain material cases.
Based on the evidence obtained, while noting the inherent uncertainty with such legal,
regulatory and tax matters, we determined the level of provisioning at 31 March 2015 to
be appropriate and at a level consistent with previous periods.
We validated the completeness and appropriateness of the related disclosures through
assessing that the disclosure of the uncertainties in note 17 and note 30 to the nancial
statements was sufcient.
Revenue recognition – accuracy of revenue recorded
given the complexity of systems
There is an inherent risk around the accuracy of
revenue recorded given the complexity of systems
and the impact of changing pricing models to revenue
recognition (tariff structures, incentive arrangements,
discounts etc.).
The application of revenue recognition accounting
standards is complex and involves a number of key
judgements and estimates.
Refer to the Audit and Risk Committee Report and
note1 – Basis of preparation (Critical accounting
judgements and key sources of estimation uncertainty).
In responding to this area of focus we instructed the eight local operations in Group audit
scope to undertake consistent audit procedures. Our audit approach included controls
testing and substantive procedures covering, in particular:
a testing the IT environment in which billing, rating and other relevant support systems
reside, including the change control procedures in place around systems that bill
material revenue streams;
a testing the end-to-end reconciliation from business support systems to billing and
rating systems to the general ledger. This testing included validating material journals
processed between the billing system and general ledger;
a performing tests on the accuracy of customer bill generation on a sample basis and
testing of a sample of the credits and discounts applied to enterprise customer bills; and
a testing cash receipts for a sample of customers back to the customer invoice.
We also considered the application of the Group’s accounting policies to amounts billed
and the accounting implications of new business models to check that Group accounting
policies were appropriate for these models and were followed.
Based on our work, we noted no signicant issues on the accuracy of revenue recorded in
the year.
Signicant one-off transactions
Accounting for acquisitions and other forms of
collaboration, such as network shares, requires the
exercise of judgements over the accounting and
disclosure for the transactions.
The accounting for the acquisition of Ono required a
signicant amount of management estimation and
audit effort. Key judgements relate to the purchase
price allocation to the assets and liabilities acquired and
fair value and accounting policy adjustments.
Refer to the Audit and Risk Committee Report, note1
– Basis of preparation (Critical accounting judgements
and key sources of estimation uncertainty) and note 28
– Acquisitions and disposals.
In responding to this area of focus, our procedures included the following:
a evaluating management’s accounting papers on how IFRSs have been applied to the
acquisition accounting for Ono;
a evaluating the work performed by management’s valuation experts including the
recognition of £777 million of identied intangible assets; and
a challenging management on the identication and valuation of tangible and
intangible assets.
Based on our procedures, we noted no signicant issues and are satised with the
associated acquisition accounting.
We validated the appropriateness of the related disclosures in note 28 to the nancial
statements.
Vodafone Group Plc
Annual Report 2015
100
Audit report on the consolidated and parent company nancial statements (continued)