Vodafone 2015 Annual Report Download - page 68

Regulators and our nancial reporting
The Group received an enquiry letter from
the UK Financial Reporting Review Panel (the
‘FRRP’) in relation to its 31 March 2014 Annual
Report during the year. The Committee was
involved at all stages of the process, reviewing
all correspondence between the Company
and the Panel. All matters have been fully
addressed and the enquiry is now closed.
As a result the Group has agreed to make
additional disclosure particularly around the
judgements in relation to the recognition
of deferred tax assets which is reected in this
Annual Report.
Whether the Annual Report, taken
as a whole, is fair, balanced and
understandable and provides the
information necessary for shareholders
to assess the Company’s performance,
business model and strategy.
As part of the Committee’s assessment
of the Annual Report to allow onward
reporting to the Board, it draws on the work
of the Group’s Disclosure Committee and
has discussions with senior management.
The processes and controls that underpin our
consideration include ensuring that:
a senior managers providing the
content for the Annual Report are
fully briefed on the fair, balanced and
understandable requirement;
a a dedicated core team of senior managers
is responsible for the overall co-ordination
of content submissions, verication and
detailed review and challenge;
a conrmation from senior management
within the business that they consider
the content in respect of their area
of responsibility to be fair, balanced and
understandable; and
a the Disclosure Committee’s review
and assessment of the Annual Report
as a whole.
We also received an early draft of the Annual
Report to enable timely review and comment.
These processes allowed us to provide
positive assurance to the Board to assist them
in making the statement required by the
UK Corporate Governance Code.
The Committee is committed to continuous
improvement in the effectiveness and clarity
of the Group’s corporate reporting and has
provided support to management to adopt
initiatives by regulatory bodies which would
enhance our reporting.
Overseeing the relationship
with and performance of,
the external auditor
Appointment of
PricewaterhouseCoopers LLP
As a result of the tender performed in the
2014 nancial year, shareholders approved
the appointment of PricewaterhouseCoopers
LLP as the Group’s external auditor at the 2014
AGM. Throughout the year the Committee
oversaw and helped facilitate a smooth
transition from the former auditor.
It was a key objective of the Committee
to ensure that the new statutory auditor
became fully familiar with all aspects of the
Group that were relevant to the external
audit process as part of their audit planning.
Key to this was a formal “shadowing”
by PricewaterhouseCoopers LLP of Deloitte
LLP through the 31 March 2014 year end audit
process at our major operating companies
and at Group. This included attendance
at Group Audit and Risk Committee meetings
before their formal appointment. This was
supplemented by PricewaterhouseCoopers
LLP performing detailed audit planning
activities at all the Group’s material operating
locations throughout the late spring and
summer and a review of Deloitte LLP audit les
at major locations.
Following this work we received from
PricewaterhouseCoopers LLP a detailed
audit plan for the 2015 nancial year
identifying their audit scope, planning
materiality and their assessment of key risks.
The PricewaterhouseCoopers LLP audit plan
for the 2015 nancial year was a key output
of the transition process and was rigorously
reviewed by the Committee.
Looking forward, the Committee
has recommended to the Board the
re-appointment of the external auditor
under the current external audit contract
for the 2016 nancial year. The Directors
will be proposing the reappointment
of PricewaterhouseCoopers LLP at the AGM
in July 2015.
The Committee will continue to review the
auditor appointment and the need to tender
the audit, ensuring the Group’s compliance
with the UK Corporate Governance Code
and the reforms of the audit market by the
UK Competition and Markets Authority and
the European Union.
Audit risk
The audit risk identication process
is considered a key factor in the overall
effectiveness of the external audit process.
For the 2015 nancial year, the key risks
identied were a combination of those
identied in the 2014 nancial year, one new
specic risk arising from the Group’s ongoing
organic investment programme, Project Spring
and one new risk in relation to the revenue
accounting process, as follows:
Previously identied risks
a Carrying value of goodwill
a Provisioning for current tax liabilities
a Recognition and recoverability of deferred
tax assets
a Provisioning for legal and regulatory claims
a Accounting for signicant acquisitions
and disposals
a Revenue recognition
New specic risks
a Capitalisation of costs and asset lives
a Billing accuracy as part of revenue process
At each meeting of the Committee,
these risks were reviewed and both
management’s primary areas of judgement
and the external auditor’s key areas of audit
focus were challenged. As part of this process,
the risks associated with the accounting and
reporting of complex supplier arrangements
was assessed by both the Committee and
the statutory auditor. This was not assessed
as being an incremental key risk for external
audit purposes given the nature of the
agreements and the low level of accounting
judgement required to be applied.
Working with the auditor
We hold private meetings with the external
auditor at each Committee meeting to provide
additional opportunity for open dialogue
and feedback from the Committee and the
auditor without management being present.
Matters typically discussed include the
external auditor’s assessment of business
risks and management activity thereon,
the transparency and openness of interactions
with management, conrmation that there has
been no restriction in scope placed on them
by management, independence of their audit
and how they have exercised professional
scepticism. I also meet with the external lead
audit partner outside the formal Committee
process throughout the year. As a Committee,
we strongly support the professional
scepticism, particularly in the areas of key
judgement and accounting disclosure,
displayed by PricewaterhouseCoopers LLP.
Board committees (continued)
Vodafone Group Plc
Annual Report 2015
66